Shaper: Stephen Rapoport

Show aired on 18th April 2015

Transcript

Elliot Moss
Good morning, what a fantastic way to start the program, that was Roy Ayers of course with Everybody Loves The Sunshine. It’s me here on Jazz FM, Elliot Moss with Jazz Shapers. The place where you can hear the very best of the people who are shaping the world of jazz, blues and soul alongside their equivalents in the world of business, a Business Shaper. My Business Shaper today I am pleased to tell you is Stephen Rapoport; he is the founder of Pact Coffee. Pact Coffee is a business that delivers beautifully ground and roasted coffee to your front door and he says it is the best in the world and we are going to sample it very shortly and I will be telling you whether it is or it isn’t. I am sure it is. Lots coming up from Stephen. In addition to hearing from him you will also be hearing from our programme partners at Mischon De Reya some words of advice for your business and as well as all of that of course, a tasty mix of music from the shapers of jazz, blues and soul, including Van Morrison, classic blues from Albert King and this from Eric Bibb.

The powerful bluesy sound of Eric Bibb with Silver Spoon. Stephen Rapoport is my Business Shaper here on Jazz Shapers. He is the founder of Pact Coffee and as I said earlier, they make the best coffee in the world so he tells me and they deliver it to your front door. They grind it, they roast it and they get it from all over the world. Stephen thank you so much for joining me.

Stephen Rapoport
My pleasure, thanks for having me on.

Elliott Moss
Thanks for coming and bringing in what I am now going to tell you here is a beautiful bag of coffee. I want to start with the coffee. Just bring it over here a second, let’s have a look at it. What’s it called this one?

Stephen Rapoport
This is Irmas Pereira which is from a beautiful, small batch producer in Brazil. Brazil produces about twenty five percent of the world’s coffee and this is absolutely one of the gems. Like they send out you know hundreds and hundreds and hundreds of tonnes a day, this is a really good one.

Elliot Moss
So Pact Coffee everybody is this business which you set up in 2012. Is that right?

Stephen Rapoport
I did yeah.

Elliot Moss
2012. He’s checking. I’ve got to tell you Stephen is very relaxed – he may drink a lot of coffee but he looks a very super relaxed man – and Pact Coffee now turning over almost a couple of million pounds, around thirty people working in the business.

Stephen Rapoport
Bit more than that actually.

Elliot Moss
Bit more?

Stephen Rapoport
Yeah.

Elliot Moss
Well it’s going far too well, my figures are already out of date. Good. We are going to taste some of this – while you make it I am going to ask you some questions.

Stephen Rapoport
Sure thing.

Elliot Moss
The bags are beautiful. It is PACT and the name of it is Irmas Pereira and you said it’s from Brazil?

Stephen Rapoport
Yeah.

Elliot Moss
You… what gave you this idea? You are going to make the coffee because …

Stephen Rapoport
Sure.

Elliot Moss
…we’ve got the kettle in here and everything.

Stephen Rapoport
I am going to try and… God just smell…

Elliot Moss
It smells good. If only you could smell…

Stephen Rapoport
It was only roasted three days ago.

Elliot Moss
The smell is fantastic. You made the move. You were actually, this is not your first venture.

Stephen Rapoport
It’s not, it’s my fourth although I had two sort of fairly quick and cheap failures initially which I think were probably my making in a lot of ways. All of the richest, the best lessons came from those. The first lesson…

Elliot Moss
Keep pouring.

Stephen Rapoport
Sure. The first lesson started…

Elliot Moss
You promised me coffee, you have to talk and deliver.

Stephen Rapoport
Yeah this is true – two at once – I can’t multi-task. Yeah so the first I started at University, ran that for four years in fact.

Elliot Moss
What was that called?

Stephen Rapoport
That was Escape Tours. It was a package tour business.

Elliot Moss
And that one failed did it?

Stephen Rapoport
Sort of yeah. We certainly didn’t achieve what we set out to. Jump forward a couple of businesses, Crashpadder. A lot of people are now familiar with a business called Airbnb. Fantastic company, you can rent somebodies home or spare bedroom instead of a hotel.

Elliot Moss
We can hear the water percolating by the way.

Stephen Rapoport
Yeah, yeah. I just want to reassure everyone.

Elliot Moss
Which I quite like. This is meant to be happening. So what is that little contraption you have got there?

Stephen Rapoport
So this is called a Hario V60. This although it sounds very complex is a really simple way of making world class coffee. A little cone shaped filter that sits on top of your mug, you can make a cup of the best coffee on the planet as quickly and as easily as you do instant. And it means that you can just get the absolute best out of a cup of coffee.

Elliot Moss
Well this is what occurred to me and it is that we will put the name of that on the website because I like these pods and I have interviewed Peter Granger from Café Pod and I want to also work out how I can get freshly ground stuff. So that’s called the… what’s it called?

Stephen Rapoport
It’s called a Hario V60 and in fact when people join Pact if they’d like to, we give them one of these for free with their first bag. You mentioned pods earlier, watch this space. We are putting our coffee into an Expresso capsules.

Elliot Moss
Wow.

Stephen Rapoport
It is being beta tested at the moment, it’s really hard to get coffee of this standard out of those caps. No-one in the world has managed yet. So give it a month or two, we are nearly there.

Elliot Moss
More coming up from my Business Shaper, Stephen Rapoport and by the time you come back after this from Van Morrison, I’ll have been sipping some of this gorgeous coffee. This is Sweet Thing from as I said, Van Morrison.

That was Sweet Thing from the seminal album from Van Morrison called Astral Weeks. Stephen Rapoport is my Business Shaper today, he is the founder as I said of Pact Coffee. Over a couple of million pounds in turnover. They deliver coffee to your front door. He’s, as he said, he’s done a couple of other ventures, haven’t quite worked out as well as this one. You studied – and by the way the coffee is in my hand now so I am just going to sip this first while you are making one for yourself over there as well still – let me just try this. That is actually, that is fantastic.

Stephen Rapoport
What you should notice from it is – so it’s a Brazilian coffee, it’s like typical of South and Central American coffee – it is quite a chocolatey, not very acidic.

Elliot Moss
Yeah.

Stephen Rapoport
Nice and rounded, works beautifully with milk. If you take milk in your coffee avoid East Africa, go for like South and Central America.

Elliot Moss
I should be taking notes.

Stephen Rapoport
More importantly it was roasted, you will see on the bag there, it was roasted on the 10th of this month. Something a lot of people don’t realise about coffee is it’s a fresh product. Once it has been roasted you’ve got to drink it within five weeks. So what brings that coffee to life in the cup is the fact that it was roasted a few days ago, it is going to taste exceptional for the next month and then it will start to flatten, start to go a bit woody. Wait six months and it will taste like similar to the coffees that you might find on the shelf in a supermarket.

Elliot Moss
Now you are talking about this because you know and because you are passionate and I think you have been quoted as saying, well at least someone said of you – ‘this person has managed to combine his passion with a business’. The businesses before and you alluded to Crashpadder, the pier to pier accommodation business which then as you said got bought by Airbnb. You didn’t nail it then. I even believe and tell me if I am wrong but apparently you almost failed the entrepreneurship module that you did at Birmingham University?

Stephen Rapoport
I think I did fail it.

Elliot Moss
You think you did fail it?

Stephen Rapoport
Yeah.

Elliot Moss
Tell me, is it you know, I meet a lot of people and the people that strike me as the happiest and doing the most successfully, doing the best are those people who have combined their passion, not always, but on the whole. Did you think it would be harder because you love the thing that you are – this thing called coffee?

Stephen Rapoport
No I thought it would be easier. Do you know, I mean I have always felt the thing that one needs most to succeed as an entrepreneur is resilience. It is so hard. It’s become quite a fashionable thing to start a business now and someone asked a great question the other day, someone was in our office, a guy was there for an interview and said, ‘of course I want to start my own business’ and one of my colleagues said, ‘is it the endless hours, the thanklessness, the low salary or the enormous risk that you know, most appeals?’ That resilience, the ability to face the same challenge that you failed four times to solve already that month and face it the fifth time with more focus, more care, more attention, more energy. That’s not there unless you are passionate about the thing you are trying to sell. You need to get more energetic and passionate the harder it gets, not less.

Elliot Moss
Now you mentioned earlier, you know the failures were the way, what you learnt. If there were one or two things that are stronger than the others in terms of the memories of what you really learnt, what would they be? You’ve mentioned there all the attractive menu of why one shouldn’t become an entrepreneur. What was it about those businesses that just didn’t work?

Stephen Rapoport
What was it about this business?

Elliot Moss
Or the businesses before.

Stephen Rapoport
Sorry the previous?

Elliot Moss
Yeah.

Stephen Rapoport
I can tell you exactly. It took quite a lot of reflection to figure it out but you know, during the earn out when I spent six months with Airbnb which was a privilege, I mean extraordinary business to spend some time in and what I realised there that was the reason they had out executed us with that business and yeah Airbnb really is one in a, one in a million start-up but it was all to do with passion. It wasn’t intellect or access to support or access to finance, it was that they cared so much more about the vision of the world after Airbnb than we cared about the vision of the world after Crashpadder. You know Pact, that’s what I have in Pact, it’s a vision for the world after we have succeeded and that’s what gets me out of bed every morning.

Elliot Moss
Well. Well if you haven’t got one of those and you are listening you need to find that vision of the world after and insert your own fantastic idea. Lots more coming up from my great Business Shaper Stephen Rapoport. He’s a great coffee maker too and I am still sipping. Latest travel is coming up in a couple of minutes and before that some words of wisdom for your burgeoning business idea, it better be a cracker, from our program partners at Mishcon De Reya.

You are listening to Jazz Shapers with me, Elliot Moss every Saturday morning you get to catch a fantastic shaper from the world of business talking to me about what they do, what makes them them and special and how you might pick up some brilliant insights. If you don’t happen to catch all the programs you can go into iTunes and put in the words ‘Jazz’ and ‘Shapers’ or you can go to CityAM.com, they are showing loads over there and FT.com as well. Stephen Rapoport is my Business Shaper today. You hopefully would have heard us enjoying a sip of coffee, I am still enjoying the coffee, it’s not too cold. He is the founder of Pact Coffee, they make amazing coffee, they find it, they grind it and it’s roasted and then it is delivered to you and he was talking earlier if you were listening about passion. Now the passion of your investors, you can’t just set these businesses up without having some investment. People have often said to me, they haven’t bought the idea, they’ve bought the person. Would that be true of you because you have got some stella people investing in you and some stella businesses from Rowan Gormley who recently has sold his business to Majestic and become the CEO to the MMC Ventures Business to Robin Kline. All those people, these are proper people and a whole bunch of angels. What made them buy into Pact?

Stephen Rapoport
Well I guess you would have to ask them. I have heard investors in the past say particularly when we raise money from connect ventures, bear in mind it was me, I say we, I was by myself in my kitchen and they backed my vision. They backed the plans for Pact rather than current business performance. I have heard a lot of investors say at that stage you back the jockey not the horse and I think that is probably what happened there. You know as the business matures, as it progresses, I think investors gain faith from your metrics, from your performance, critically from what your customers say about you. I think there is a lot of cynicism around venture capital or investment that they are all sort of greedy fat cat bankers but I can say with certainty the guys on my Board you know they challenge my vision, they challenge the purpose of the business, they really push the company to be all it can be. Not purely from a financial return point of view although of course you know, they do need to make money as well.

Elliot Moss
And tell me about that vision because again if there is a business then there is a trend that says one ought to have a vision, not just a vision that delivers money but delivers something else. What’s the something else for you?

Stephen Rapoport
I think that’s right and you know, don’t get me wrong, there are business people out there whose vision is how to execute the competition and that’s the thing that they get their energy from and their passion and that’s totally valid, like credible. For me it’s, it’s flavour. The importance of flavour I think is the, was the original driver for launching Pact. I think, I think flavour is as credible and as beautiful and a form of art as music is or as painting. I think it can move you in exactly the same way and it has just as much social value. In my opinion coffee is – I mean this kind of coffee is as good as flavour can possibly get. It is the most symphonic and like potentially breathtaking and people are robbed of it by the convenience of instant or capsule coffee or by sort of commodity coffee that you would find on the shelf in the supermarket and there is two reasons that’s a bad thing. First of all we solve a problem at home, we solve a profoundly first world problem in the first world which is access to the best coffee you have ever made yourself and the promise of never running out. Importantly the problem that we solve at origin is we through converting people in the UK from instant to speciality coffee which is ultimately what we are doing, we create a huge amount of value. I mean Pact I am really open about it, it’s probably ten times the price of a cup of instant coffee. I think its phenomenal value. Anyone that makes the leap from instant to speciality, yeah they are probably going to spend a couple of hundred pounds a year more on coffee if they drink two cups a day. But all of that value goes back down the supply chain to the producer and commodity coffee is picked by unskilled labour, in the third world, it’s a seasonal unskilled migrant workforce who are paid cash in hand. Like the opportunities for human rights abuse are rife and specialty can’t be picked by unskilled labour. You know, our pickers, they are not wealthy but they live above the poverty line and you know, there is two ways you can effect that change. You start a Charity or you start an aggressively commercial business with a good heart and you know, I have done the latter because I think its, it’s going to be a much more effective way of solving the problem.

Elliot Moss
And that is a vision and I want to talk about execution after a little bit more music. This is Albert King with Kansas City.

The legendary Albert King with Kansas City. Stephen Rapoport is my Business Shaper and he has been talking about his vision and that vision of flavour, that vision of a fair supply chain, that vision of speciality, charging more, it’s expensive but it’s of great value. All of those things make perfect sense. You used the phrase a couple of times, ‘out execute’ and sometimes you know, if it is a Pret a Manger they wanted to out execute other sandwich bars and McDonalds likewise. You mentioned Airbnb. How were you out executing your competition whether you define your competition directly as speciality or anyone else that is delivering on-line and it is, a lot of this is on-line delivery management isn’t it? I am imagining or you, at least that’s where a lot, is that correct?

Stephen Rapoport
Yeah there’s like a logistical complexity and of course you have got to be efficient in what you do as a business like we, we are not a huge company but we on a busy day have to roast and grind and pack and ship a tonne of coffee which is about four thousand packs and you’ve got to do that in a cost effective way.

Elliot Moss
But are you doing it in a really… in a way that no-one else has done you know.

Stephen Rapoport
Well actually…

Elliot Moss
This point about out executing the competition

Stephen Rapoport
That side of things yes I think we are really innovative with what we do. All of the technology that we use to sort of power our roaster in our factory we built in-house with raspberry pies for those geeks in the listenership. They are like tiny little some moderately but sufficiently powerful computers and we’ve coded everything ourselves.

Elliot Moss
How did you know how to do all this by the way Stephen? I mean you’ve gone, I know you have set up…

Stephen Rapoport
Geekery.

Elliot Moss
…but where does, where does the geekery begin? Obviously you want to find out but where did you go to build this now what sounds like to me, the naive person over here in the coffee world, but what is it? Because you’ve really, you know to build a supply chain, to work out who to go and talk to, to pack, to have the technology, the… what did you call it? The raspberry…

Stephen Rapoport
The raspberry pie.

Elliot Moss
The raspberry pie. All those things, they take a level of knowledge?

Stephen Rapoport
Well it’s funny and I think you’d find this probably from any other passionate person if you ask them where their knowledge about the thing they are passionate came from, they probably don’t know. They are just aware they have always been accumulating it and the same thing is true for me of coffee and also of I suppose, entrepreneurship. I just… it’s always thrilled me.

Elliot Moss
And you say that, since when? I mean obviously I got, you went forever.

Stephen Rapoport
Forever. My first ever commercial enterprise was probably when I was ten buying a pack of sweets from the tuck shop at school and selling half the pack individually, getting all my money back and going and sitting by myself and eating that half a pack of sweets and it was like the best flavour. Yeah.

Elliot Moss
And then what was there… was there something in your teens as well?

Stephen Rapoport
I think at sixteen I probably had the same business model but cigarettes. No, it’s gone from there.

Elliot Moss
Where does that come from just as a quick question. Is that a familial thing? Or that’s just you Stephen?

Stephen Rapoport
My dad was an entrepreneur and you know, still is. I don’t know, do you know I have no idea. I am just, it’s something I am just aware of. Yeah it’s something I am aware of that drives me that sort of thrills me.

Elliot Moss
It’s nice to sound you know, he is a man that’s very thrilled. Final chat is going to come up with Stephen plus we will hear some music from The Elder Statesman, that’s after the latest traffic and travel here on Jazz FM.

The anthemic sound of The Elder Statesman with Montreux Sunrise. Stephen Rapoport is with me for just a few more precious minutes and we have been talking about passion, we’ve been talking about vision and the two are obviously related and critically Stephen we have been talking about execution because passion and vision are one thing but without execution you wouldn’t have a growing revenue or a margin or indeed people that wanted to invest in you. We were talking before about where that knowledge has come from. What’s the most critical part of the execution of your business?

Stephen Rapoport
So I think, I think it is in knowing what to measure and what to try and influence and the knowledge that the two are normally not the same thing so as any business book will tell you that you should measure the cost of acquiring a customer and the lifetime value of that customer and to try to accelerate the lifetime value and try to increase it and improve retention and I think for Pact one of the critically important things is to make sure that everyone in the room knows that although those metrics are really really important and you know, don’t get me wrong, I look at them often. They are not the thing we are trying to change, they reflect that we have succeeded in changing a customer’s experience or how well we are listening to our customer base or how well we have improved the quality of our coffee so…

Elliot Moss
Have you needed any other help externally from like the Government or from these, the loans that they may have offered or access to capital or any things like that or has it been you and the group of people that you have surrounded you? The reason I ask is because people, many entrepreneurs I talk to say ‘you know what, if you are depending on the Government, you are depending on the wrong group of people’.

Stephen Rapoport
Yeah. I’d say that.

Elliot Moss
Not in a bad way, not against this Government or any other Government but…

Stephen Rapoport
No.

Elliot Moss
…but just the general point.

Stephen Rapoport
That’s an excellent way to put it. We have certainly benefitted from some things the Government has done, the EMI Scheme is a great example. Every member of staff at Pact own some of the company in a very tax efficient way. Like that’s good. EIS has made it easier for us to raise capital but then we’ve been damaged by some of the things that they do. You know, ultimately I don’t think that we would have made any different, any decisions differently as a business and our vison wouldn’t have been influenced by anything the Government could do. They are a force that exist. I think in my mind at least that nudge by a tiny degree in one direction or the other like the outcome of what you are doing rather than influence what you are doing. I am sure that stops being the case when the business is sort of an order of magnitude larger or after floatation or something. I am sure the effects of what they do can be felt more directly. But right now, you know, we are growing 20% a month and I don’t think there is anything the Government could do that would improve or damage that.

Elliot Moss
Good keep it that way. The one thing you would say to a budding entrepreneur right now? Yes or No? Go and do it?

Stephen Rapoport
Oh God…

Elliot Moss
Because you talked earlier about well everyone seems to be… what would be the criteria, what’s the question they…

Stephen Rapoport
It’s so difficult.

Elliot Moss
…is there a question they should ask themselves?

Stephen Rapoport
So yeah, yes it’s ‘do you care about the problem that you are trying to solve so much that if someone set up in competition with you and they succeeded and as a result killed your business, would a large part of you be delighted for the fact that the problem had been solved?’ If the answer is no then I don’t think you should start that business. Right now it’s probably never been easier to launch a business, to raise with these tax breaks and stuff, a hundred grand, fifty or a hundred or a hundred and fifty grand and stop doing your job for a few years while you try to do this business but if it is not going to succeed then that’s just middle class benefits and I don’t think it’s a good thing for the economy or for the people involved to launch that kind of a business. If it’s based on passion then do it immediately and you will never look back with regret.

Elliot Moss
Fantastic answer. Thank you so much, it’s been great meeting you.

Stephen Rapoport
Yeah you too.

Elliot Moss
Thank you so much for your time and your coffee especially.

Stephen Rapoport
My pleasure.

Elliot Moss
Just before I let you go, what’s your song choice and why have you chosen it?

Stephen Rapoport
It’s Humphrey Littleton, I Double Dare You which I, do you know it’s the first jazz record I ever bought. Humphrey Littleton I saw this record out the front of a second hand record shop in Soho for a quid and I bought it and I must have played it two or three hundred times since. I just…

Elliot Moss
Well here’s another time we are going to play it especially for you. Thank you so much. This is him, Humphrey Littleton with I Double Dare You.

That was I Double Dare You from Humphrey Littleton, the song choice of my Business Shaper today, Stephen Rapoport; evangelical person, wow did he love his coffee, passion running right through him. Fantastic and unbelievably geeky about his subject. He was obsessed wasn’t he. He really knows what makes a great cup of coffee. Thank you very much, I hope you enjoyed the program. Stay with us here on Jazz FM because coming up next, it’s Mr Nigel Williams.

Stephen Rapoport launched PactCoffee.com in 2012 as a way to combine his two biggest passions: coffee and entrepreneurship. Pact works as a flexible subscription service delivering the best coffee from around the world to coffee-lovers in the UK at home or in the office within just 7-days of roasting –when it tastes the best. Stephen is a seasoned entrepreneur and early advocate of community based consumption – Pact is his fourth start-up. He previously built and sold the apartment-sharing site Crashpadder to Airbnb.Pact has already secured over £2.5m in investment from the likes of Connect Ventures, Taavet Hinrikus (TransferWise/ Skype), Robin Klein (Index Ventures) and Rowan Gormley (Naked Wines). The team has grown from 10 to 35 in the past year, grown at an average of 20% month on month, and is now sending out thousands of bags of freshly roasted coffee every day from its HQ in Bermondsey. Pact is making speciality coffee accessible to everyone. While improving millions of mornings in the UK, it will also drive a better income to thousands of poor coffee farmers around the world.

Follow Stephen on Twitter @stephenrapoport

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