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Escape the City Investor Report January December 2014
Escape the City
Investor Report
January December 2014
Contents 1. Director’s Letter 2.Commercial Review
a. Recruitment b. Education
3. Financial Summary a. Income b. Costs c. P&L d. Growth Capital
4. Overall Vision
Dear Investors, A really warm welcome to your third annual Escape the City investor update. 2014 was a real comingofage year for our business and there is a lot to update you on. As usual, grab a cup of tea and please catch up with what we have been achieving at Escape. You may find it easier to print this document and read it in your own time. Incredibly, Escape the City is now in its 6th year. In 2010 we left our corporate jobs to help frustrated but ambitious professionals make brave career changes. We believed that by helping millions of people achieve happiness in their work (and lives), we would also be able to play a role in improving the system for the better. The fact is that most people at some point in their careers will want to “escape” or make a brave career transition either towards more meaningful employment or towards a more entrepreneurial way of earning their living (and often, indeed, they desire both). The goal hasn’t changed. Back in June 2012 we asked the Escape the City community to be part of this journey to believe in us and our mission, to invest in an exciting idea and, through doing so, provide us with the capital and support we would need to turn this concept into a worldclass business. 395 of you, from all over the world, believed in our message and together invested £600,000. Through making this happen, you demonstrated that you shared our belief that the way things were working wasn’t working. The act of crowdfunding an idea you believed in was an amazing example of how we could collectively reject some of the negative aspects of mainstream corporate culture and build lives, careers and businesses on our own terms. All the trends are in our favour. Now, 5 years on, we believe we are seeing a more fundamental shift in mindsets. The growing discontent that we tapped into 5 years ago has turned into a global movement. We are all living through a fascinating era: an era where definitions of success, work and meaning are evolving rapidly. Technology is democratising access to the tools of value creation and the institutions of the previous century are increasingly finding themselves no longer fitforpurpose. All over the world, our personal aspirations are leaping forwards faster than the infrastructure of the institutions many of us work in. People need help with transition. We are in an excellent position to serve this need.
Introducing The 21st Century Career... Escape the City is in the perfect place to lead this cultural shift. Still today no one else is doing what we are doing in the way that we are doing it. The dozens of enthusiastic emails we receive each week from around the world are a testament to how unique our concept is. Our brand, mission and products are really resonating. In 2015 we are going to position ourselves as the flagbearers of a new concept: The 21st Century Career. Over the coming months we will publish and promote a series of big new ideas around this title. We are regularly approached by big corporates and associations of HR directors to share our thoughts on job satisfaction, meaning at work, and retention. As we continue to grow the business and the community we will develop and communicate brave and challenging ideas around this new world of work as we continue to play a leading role in this cultural shift. Our concept is resonating around the world. Over the next years we will develop new products for our community and launch them into new markets and, in doing so, help millions of professionals around the world make brave and meaningful career changes. Our next objective is to help 1,000,000 people use our platform to escape unfulfilling work. We intend to celebrate thousands of individual outcomes and, in this way, show the world that it is possible to “do something different” with your career and do work on your own terms. This idea has always relied on its community. It is the community that turns a simple idea into a genuine movement and, in the process, gives us the permission to build a sustainable, growing and valuable business. We are incredibly fortunate that at every stage of our development we have a) attracted a highquality community of people who believe in our message and b) managed to provide enough value to our users at every stage of our growth that they have remained engaged. Our objective has always been to monetise our large community in authentic and useful ways by providing them with great value and helping them make the transitions that they are looking to us for. The only sensible foundations for this business are ones that are firmly rooted in respecting our members and helping them solve their most pressing problems. Reflecting on the past 5 years, 2014 was a huge turning point for us. We had 2 aims:
1. to reach a breakeven threshold of revenue ; and 1
2. to build the foundations for accelerated growth. We are pleased to report we achieved both of those aims in 2014. We did this by doubling revenue in our primary business unit recruitment and by cracking our education revenue stream whilst taking on our own flagship venue 100 metres from the Bank of England right where our UK users need us most, in the heart of The City of London. In September 2014, many of you kindly attended our launch event, where we cut the ribbon at The Escape School. As you will read below, we have made really rapid progress on our education products to the extent that they will contribute over half of 2015’s revenue. The fulltime headcount on the team today is 12, with a further two really strong team members joining us in April. After a 2014 of experimentation and building, we now have a plan in place to grow our operation to £1m turnover in 2015. This will be a significant milestone and will reflect the fact that we are successfully developing the products, processes and team needed to scale the business in the UK and internationally. Our overall vision is to become the world’s bestloved career change brand. We are still a startup and the next few years will be challenging. However, we are putting some extremely solid foundations in place and the business today is in a strong position. All the details of last year’s progress and this year’s plan are below. Please have a read, let us know what you think and, if you have any questions, please refer to your Investor FAQs. Once again thank you for your support and involvement in Escape the City. Rest assured that we are working tirelessly to ensure we make the most of this privileged opportunity. All the best for 2015, Dom, Rob & Mikey Escape the City Directors [email protected] www.escapethecity.org
1 We wanted to reach breakeven on January 2014’s cost base. By December 2014 we had decided to grow our cost base significantly to capitalise on the School opportunity which is why we still posted a loss in 2014.
2. Commercial Review
The best way to break down activity at Escape the City is to view what we do in terms of business units. Our business units are separate collections of products and services that we create for our members that produce revenue for the business. Our approach to date has been to grow the community whilst building one business unit (recruitment) that works (i.e. that generates scalable, sustainable revenue) and focus on reaching product/market fit. The plan is to use the stability and security the first business unit brings to test and develop others (i.e. education, publishing, conferences). Over time, we will develop a range of business units under Escape the City with products that a) our users want, b) create revenue, and c) generate decent margins to allow us to reinvest and repeat the process. This approach frames our activity for 2014 and how our 2015 plans are shaping up across our two main business units: recruitment (Esc Opportunities) and education (The Escape School).
2a. Recruitment Our aim is to be the automatic destination for the most interesting jobs in the world. It is hard for people to find interesting and unique opportunities. In 2015 we are continuing to serve our members with exciting, hardtofind opportunities, defined by our signature Esc Factors: Entrepreneurial, Social Good, Exotic Locations and Exciting Brands / Products. Typically in terms of recruitment, employers find it hard and expensive to find good candidates. An increasing number of companies are using Escape to promote their jobs to our +200k members at a fraction of the cost of using traditional methods with excellent results. Vital Statistics 2014
1,923 Roles Posted 969 Different Organisations 2,196,237 Unique Listing Views 126,870 Applications 43,829 New members
The Escape Recruitment Vision Whether a member wants to escape to Bali or Basingstoke one thing is clear: everyone’s escape is different. We are now using intelligent matching technology to connect members with the right job opportunities relevant to their past and their future aspirations. Our aim is to evolve our platform into a more intuitive and fun job search experience. Think ‘Tinder for jobs’.
Recruitment Progress in 2014 Record Revenue We achieved a record year and almost doubled our recruitment revenue. Total revenue for 2014 was £260k (inc VAT). The majority came from UK listings as the market for startup jobs grew and our reputation for quality candidates and excellent customer service strengthened. 969 employers posted 1,923 jobs on the site. The average spend on a job posting was £135.
Investing in our technology The cost of sales associated with providing our online recruitment product is extremely low. This means we can achieve really high gross margins on our products (c.96%). Our focus for 2014 was to make the product more effective i.e. improve our ability to match the right people to the right jobs. Our thinking was that if we can create the technology to do this automatically then we are in a great position to scale a high margin product. A more effective product means our employers benefit from being able to reach more of the right candidates and make hiring a more likely outcome. In turn this improves client retention rates and attracts new business through referrals. This is no easy task, but 2014 saw us make big strides with our matching technology and our levels of customer satisfaction. Job Matching Algorithm A large chunk of 2014 was spent getting data on our members’ past and future career preferences to develop an intelligent algorithm that matches them with relevant jobs. As of March 2015, we have data (behavioural, work experience, future escape preferences) on +127,000 of our members (64% of the total registered user population).
We built and tested multiple versions of an algorithm that takes into account not only our members’ backgrounds but also their future preferences and viewing habits. This has enabled us to send targeted emails to users when relevant opportunities are posted. Our Targeted Notifications product went live to our employers in May 2014. When employers post a job they now have an additional option whereby they can pay an additional £100 for us to send their listing to the most appropriate people in our database. Results Since Algorithm Launch May 2014
256 targeted notifications bought
Generating £26k additional revenue
13,744 emails were sent
Generating 10,000 additional job views
With 75% reporting that the matches were either “Spot on” or “OK”.
In addition to job matching, we created ‘Opportunities for you’. A new area on the site where members can view opportunities that are relevant to them and easily update their data to teach the algorithm what they’d like to be matched to in future. There is still more progress to be made in terms of the algorithm’s accuracy and usage, but we have proved that it is a very useful tool for both employers and members. As we grow our member base and list more opportunities, our ability to intelligently match is going to be the key to scaling our this product and delighting both candidates and employers. Other Product Developments 2014
The site is now fully mobile ready in response to our users switching their online viewing habits from desktop to mobile.
The job upload process has been entirely rebuilt and enhanced making it easier for employers to post jobs and increase the amount of money they spend.
We built and tested a Candidate Search tool for employers. However, we did learn that the vast majority of employers just want to post jobs and wait for candidates to apply.
Recruitment Outlook 2015 As the career trend to ‘do something different’ grows so too do the number of exciting job opportunities being advertised. There are more jobs that are applicable to the Escape brand than ever before and the recruitment product is now in a great place to take advantage of this. In 2015 the recruitment team are focusing on four things: 1. More jobs: Our aim is to list more opportunities. We are reengaging employers who have used us before to post more jobs, as well as working to attract more new employers. 2. More applications: Our aim is to create a more personalized experience for our members. Alerting them to the relevant opportunities and making it easier for them to apply. 3. More revenue: Our aim is to double our 2014 revenue to £500k (inc VAT). We will do this by retaining more employers, attracting more employers and increasing the average spend. 4. Celebrating more successes: Every day people get jobs through us – to date we haven’t done enough to share these incredible stories with the world. This will change in 2015.
2b. Education Brave career transitions are hard. Fear, lack of viable options and skills often get in the way of people deciding to make the big changes required to find more meaningful work. We have learnt that if our members a) have access to allies (likeminded people) b) are held accountable to themselves and others and c) take the right actions (taught and learnt) then they are much more likely to feel able to find ways of doing work they love. These three components are the basis of The Escape School’s curriculum and philosophy. In 2014 we developed a range of courses, talks and workshops selling over 8,000 tickets. By December 2014 we had found a really exciting formula which we are now focusing on. Vital Statistics 2014
+8,000 tickets sold to talks, courses, & workshops at The Escape School.
51 career change essays published: http://school.escapethecity.org/essays/bydate/.
+£150,000 generated in revenue (NB: some of it will land on 2015’s accounts).
+200 entrepreneurial ventures started with the support of The Escape School.
+200 resignations & career changes with the support of The Escape School.
Specific Milestones 2014
Jan Dec: We put 241 people through our weekend Startup MBA course. This course has now run over 20 times with incredible feedback and great student outcomes.
Apr Jul: We conducted a period of intensive testing producing over 40 talks and workshops in a rented events space. This provided us with the customer feedback we needed to be confident of taking our education ambitions to the next level.
Jul: We formed an education partnership with a charity called Bathtub 2 Boardroom, who run a startup incubator on the 1st, 2nd and 4th floors at 1 Frederick’s Place. We are renting the 3rd floor in the same building from them and we are collaborating on a series of initiatives aimed at entrepreneurship education and communitybuilding.
Aug: We refurbished a 4000 sq ft dedicated events space (ourselves!) and moved our team into The Escape School – our dedicated education and community space in the heart of The City just 100 yards from the Bank of England.
Aug: We formed our first community at The Escape School The Founding Members 100 people who paid £150 each to help establish and shape the future education curriculum of the school whilst getting free access to all of our talks and workshops.
Sep: We agreed a £30,000, 12month venue partnership with our friends at Crowdcube to be headline sponsors of The Escape School. Crowdcube are disrupting the enterprise investment market and are perfect partners for an unconventional school teaching professionals to be more entrepreneurial.
Oct: We developed and successfully piloted our prototype ‘Tribe’ with 100 people paying £450 to enrol on The Startup Tribe (a threemonth education and community experience aimed at getting people from idea to v0.1 launch).
Dec: After assessing what worked and what didn’t work so well in 2014, we redesigned our entire curriculum and product range around community. Our Tribes are now our flagship education product and, after interviewing 200 people in December 2014, we recruited 100 more people onto two new programmes Escape Tribe & Startup Tribe starting in January (two 3month programmes, £1500 per head).
Other Campaigns & Projects 2014 We are preparing a separate community report to summarise the incredible activity, individual outcomes, feedback and marketing campaigns and coverage that we achieved in 2014. As well some amazing success stories, this report will include a summary and gallery of:
The Alternative Careers Fair Nov 2014, 20 exciting, flagship employers including TeachFirst, Uber, VitaCoco, and Graze introduced to +150 talented Esc members;
Escape to the Shed over 90 people applied to quit their jobs and start their businesses rentfree from a shed in Esc HQ’s garden, we had an incredible winner;
Escape to Umbria our longtime collaborator, Ben Keene (founder of Tribewanted) took two groups of Escapees to Umbria for career change transformation weekends.
Escape to the Woods Sept 2014, our career change microfestival, also produced by Ben Keene, saw 100 people camping in an idyllic setting in Buckinghamshire, UK;
Das EscapeManifest translated into German, The Escape Manifesto (selling well in English) spent the second half of 2014 in the German business bestsellers charts;
1 Fred’s Place we entered into an exciting partnership with the other organisations in our building FabLab London and Bathtub 2 Boardroom (see @1fredsplace on Twitter);
Crowdcube sponsorship we were thrilled to form a flagship brand partnership between Crowdcube and The Escape School (worth £30,000 to Escape);
The Escape School outlook 2015 The focus of our work this year is to develop and deliver on our Tribes concept. This year we are building capacity across our sales & marketing, our team, and our curriculum to be able to impact more people at scale in the UK and internationally from 2016 onwards. At the time of writing we are growing our team, working with our education delivery partners, and evolving the programmes whilst enrolling 50 people on each Tribe. The targets are 100 people paying an average of £1750 per quarter = c. £700,000 per annum (inc VAT). The results we are seeing at The Escape School are absolutely incredible and we are happy to report that the programmes that we are offering seem to be going to the heart of helping people solve the problem that inspired the creation of Escape the City in the first place. Every week over 50% of our c.1,000 new members are from outside the UK. Wherever there is a large international city with professionals working in big organisations, there is potential demand for our business. This represents a huge opportunity. Through 2015 we will focus on building strong foundations to export this product beyond the UK.
3. Financial Summary
3a. Income
2012 2013 2014
Overall Revenue £122,871 £131,351 (+7%) £321,555 (+145%)
Recruitment £70,651 £111,649 (+58%) £209,011 (+87%)
Education £52,220 £19,702 (62%) £112,544 (+471%)
NB: All figures are excluding VAT, so our original Accounts Receivable invoices generated were all 20% higher. Additional positive income indicators There was a fair amount of additional revenue generated in 2014 through activity that Escape the City was involved in that, for the reasons summarised below, isn’t shown in the £321,555 turnover figure in our accounts for 2014:
1. Where we share revenue with partners (i.e. in our education products we will sometimes agree a revenue split) only our share of the revenue has gone to the profit and loss account. In 2014 the total revenue with a partner share agreement saw roughly £50,000 go to partners.
2. We outsourced the production and delivery of Escape to the Woods, our career
change microfestival in September 2014. Although the event didn't generate a profit, it was a really positive communitybuilding and marketing initiative and over £17,000 worth of ticket sales were generated from the Esc community by our partners.
3. Our 2014 accounts show £103,551 of deferred income which will be reported in 2015.
This consists of the majority of our £30,000 sponsorship revenue from Crowdcube (only £7,500 of it hit 2014’s books) and the rest is education revenue for Q1 2015 programmes that were sold in December 2014 but, for accurate management reporting, this will be accounted for in 2015’s accounts.
Revenue targets for 2015 We have ambitious revenue targets of £1,000,000 for 2015, split 50:50 between our recruitment and education business units.
3b. Costs In 2013 the overall cost base was £201,308. In 2014 the overall cost base was £384,848 (an increase of 91%). Salaries The main cost to the business is salaries. We ended 2013 with 6 people on the payroll, whereas we ended 2014 with 9 people. We pay marketrate startup salaries for our technical and nontechnical roles. The success of this business relies wholly on the quality and performance of our team and therefore it is crucial to invest accordingly. Cost of Sales Increasingly, as the education business expands, we will incur more speaker/teacher costs as part of the delivery of our programmes. Our cost of sales figures also include catering, stationery, printing and bank fees related to our event production. Rent In April and May we hired event space from Bathtub 2 Boardroom on a payasyougo basis, before taking on the whole of the 3rd floor at 1 Frederick’s Place (4,000 square feet) for The Escape School. We secured a great deal on rent along with an education partnership with Bathtub consisting of a series of benefitsinkind. We spent £25,000 to fit out our new home and, for 4 months whilst the work was being undertaken we were paying rent on our Battersea office and The Escape School. The whole team is now based at The Escape School and our estimated annual running costs and rent are c. £75,000. Additional Outgoings The rest of our outgoings consist of basic running costs web hosting, software subscriptions, hardware, staff welfare, legal and accounting. We keep these costs as low as possible so we can invest in our people and in turn develop the business. Cost forecasts for 2015 The distribution of 2015’s costs will follow a similar pattern to 2014’s, with a few differences which are outlined below. Our overall forecasted cost base for 2015 is £850,000 with £550,000 in fixed costs and £300,000 in anticipated marginal costs, primarily related to delivering education products after we have made the sales. Although we don’t anticipate growing the recruitment team massively, we will continue to grow the education team in both fulltime and parttime roles, led by sales growth. As we run more education programmes, we will also incur more costs of sales related to things like catering, stationery and printing. As the business develops this year we anticipate spending more money on accounting support and legal support. Given that we are nearing a place where we can consider accelerating our growth, in 2015 we will explore efficient returnoninvestment marketing tactics (both traditional and digital) as well as PR.
3c. P&L In the past the focus has been revenue growth and the hunt for product/market fit. As we move into the next phase of building Escape the City we are increasingly focusing on selling products with strong margins. However we are not intending on posting a profit in 2015 and we will reinvest any additional cash generated in growing the business. As long as there is a clear path to profitability within individual business units, individual products, and in the business as a whole, we will continue to reinvest into building the business. We are prepared to make another small loss in 2015 in order to establish strong foundations for a really valuable business over the longterm.
3d. Growth capital We are not planning on seeking additional capital to grow the business in the immediate term. As we progress further into 2015 and build out our two business units we may find that we create opportunities to grow faster than we can on our revenues. In this scenario we might consider seeking external financing either in the form of debt or equity financing.
4. Overall Vision
We see three key phases to building Escape the City and we are currently in the middle of Phase II. Below is an outline of what each stage consists of. Phase III is the accelerated growth stage and the stage at which a profitable business and/or exit would be most likely. Similarly, as we continue to invest in building serious and sustainable value over the longterm, we may also reach a position beyond 2016 where we are able to pay dividends. At this stage however, our priorities are to build solid foundations for a valuable business. Beyond 2015 we hope to expand the business internationally. This could involve a physical presence in cities beyond London (e.g. Escape Schools in New York, Germany, and beyond) and online international expansion of our recruitment and education businesses. The progress that we are already making in 2015 and the international experiments that we are seeking to run by the end of this year will give us much more of an indication of the most valuable and viable path for us to take as the business grows beyond the UK.
