An interview with Charles Armstrong

Thursday 14 February 2013

Charles Armstrong is a London-based ethnographer and entrepreneur. He’s the Founder & CEO of Trampoline Systems, a social network analytics company that became the world’s first technology business to raise finance through crowdfunding in 2009. He's also the Founder of The Trampery, the first co-working space for startups in Shoreditch, and the “Tech City Map”, a project analyzing the East London technology ecosystem that was launched by Prime Minister David Cameron in November 2011.

What was your path to starting Trampoline Systems and The Trampery?

In an odd way, they both have their origin in the Isle of Scilly - a small group islands off the south west tip of Cornwall. I went there for a year in 1999 to do ethnographic research, to try and understand the way that informal social networks help people solve problems in communities. I started thinking that if you could track these characteristics in an electronic communication system then you could start to mimic some of this social behaviour on a much larger scale. I put forward a proposal to the Duchy of Cornwall, which owns most of the land there, to take a disused two-story granite barn and convert it into a shared workspace. The project never came to anything but it sowed the seed for what would eventually become The Trampery.

I set up Trampoline Systems in Shoreditch back in 2003 when there were hardly any software businesses in the area. Suddenly in 2008 there were loads, everybody wanted to come here and I realised that the moment had come to try and put some of these ideas into practice. Initially all we did was squeeze Trampoline’s team into one half of the office and lay out desks in a cluster formation - which has really stuck and worked well. That opened in October 2009 as the first iteration of the Trampery and we’ve just grown from that.

What is your first memory of the Internet?

I remember having the Mosaic browser demonstrated to me in Edinburgh at the Fringe Festival in 1993. I’d been using computers since I was a teenager but I couldn’t figure out what this Mosaic thing was doing! It seemed completely impenetrable. I got an email account in 1995 and I remember how complicated it was setting everything up - the programs were really, really crude. But then Apple launched this thing called eWorld. I remember it had this beautiful user interface but it was never very useful. It was a commercial disaster but it was the first glimpse of what a user-friendly Internet might look like.

You studied Social and Political Science at the University of Cambridge. How did you end up getting into technology?

After uni I put together a project with Lord David Owen who was then the EU peace envoy in Yugoslavia. We made a CD-ROM called “Balkan Odyssey” that pulled together every scrap of archive material relating to the peace process. It was the first cross platform CD-ROM that used a single media archive - prior to that, you had to dedicate half the capacity to Windows and the other half to Mac. It was an amazing experience and the first of many projects that I’ve done where the established opinion said “this is impossible, you can’t do it”. When we launched it the Economist reviewed it as "a publishing landmark" and it's still used as a reference resource by universities around the world today.

What have you learnt about London’s startup ecosystem from the Tech City Map?

The single most surprising thing we learnt was that 92% of the 1,300 businesses are co- located. I had no idea the figure was going to come out so high. Co-working is clearly the dominant form of space use for businesses around Old Street. The Tech City Map is already being used by the decision planning team at the Greater London Authority to inform their economic planning.

Why do you think co-working has become so popular?

You usually hear people talk about the affordability and the flexibility, but I think it's part of a much deeper shift in working and business development patterns. If you look at the rationale for the factory, it’s about operating a pre-planned process as efficiently as possible, reflecting the hierarchy of the organization and the structures of the processes. Innovation businesses don’t have any of those requirements. Everything is about creativity and inspiration and a very fluid way of working - all very social considerations. We need to think about workspaces as social containers rather than something that is defined by process. Being in an environment with other businesses and other people with diverse experience and ideas is a very powerful context to enable these kinds of social processes.

The Trampery is now getting approached by businesses with 70 or 100 employees - even though they’re no longer startups, they want maintain some of the characteristics of being a startup. I don’t think this is a small local phenomenon. It's a kind of petri- dish version of a general trend that over the next decade will change the way that everybody is working. It’s not going to be a small niche, this will be the dominant model.

What do you think of crowdfunding?

Trampoline was the first company in London to raise finance through equity crowd funding. There are now a couple of platforms that help startups with crowd funding and it's become a hugely important mechanism. You’re not just dealing with big name Angels with fat pocket books - you can use your social networks, your friends and family but on a much larger scale and end up with a useful amount of investment. But I do think it’s only one of a number of innovative financing methods: there’s a huge need for new kinds of loan-based finance and new ways of aggregating both personal and institutional resources.

But what about the contacts that the VCs and Angels bring?

A smart entrepreneur will still try to get Angels who have expertise and relationships to contribute, but you can mix that with people who don’t offer anything strategic. We need platforms with the sophistication to differentiate between superstar, high-value Angels and more casual investors and be able to link them together. If you have an Angel say, “this is a good deal, I’m going to put some of my money in” that sends a signal to the market which you can use to attract more capital. The platforms aren’t that sophisticated yet but I think that in five years time this will be a very mainstream part of how a lot of early stage businesses raise finance.

What is biggest challenge for startups in London?

The biggest obstacle is a very pessimistic and doom-laden global economic picture. It's always there in the background and it can sap your energy and motivation. Fearfulness is the greatest enemy of entrepreneurship and innovation. One of the most important things that a workspace like The Trampery can do is to defend against that and create bubbles of optimism and positivity - the more confident people are, the more they will do bold and imaginative things. This isn’t just a British problem, it’s a worldwide issue.

Access to finance is another perennial problem. But in a way, I don’t think that’s as much of a problem as some policy makers do. A lot of Internet-era technologies mean that the threshold to start a business and enter a market is very low. The capital requirements that were typical 10 years ago just don’t exist now. Having said that, I think we should be looking for a hundred-fold increase in Angel investment currently circulating in the UK. I put quite a lot of time into initiatives that are looking to make that happen.

Is this the second Internet bubble?

I suppose through 2011 and 2012 you saw some floatations that looked pretty bubblish. But then, if you compare what’s happening now with what was happening in 1999 there’s nothing like the amount of money sloshing around or going into crazy businesses that are clearly never going to make money. That’s gone and it will take a generation for people to forget what happened and be ready to do it all over again. I think in an odd way, a lot of the predictions that people were making in the late 90s about what the Internet was going to do are actually starting to be realised now. It took a lot longer than people thought.

What is the one thing you’ve done that you would definitely do again?

As an entrepreneur, I never do the same thing twice. Once I figure out how to do something, I will then go and do something different. I think I’ll only set up things if I have no idea how they’re going to work out. It’s not a matter of choice, I just can’t do anything else. Everything I do, regardless whether it succeeds or fails, I learn as much as I can from it then put that into the next thing I set up.

What was your biggest failure?

Probably the biggest error of judgement that I've made was the Series A investor I worked with for Trampoline Systems. I did a deal with a massive hedge fund back in 2007. I raised $6 million but when the public markets collapsed in 2008, the hedge fund completely pulled out of early-stage technology investing. It was a huge challenge to stop Trampoline from collapsing and buy enough time to restructure it and re-engineer the business to grow through revenue. It took 2 years to turn it around. That was a significant error that I made, through inexperience more than anything else.

But it's important to recognise that a lot of innovation came out of that experience. It provoked the equity crowd funding and the opening of The Trampery - the biggest mistakes sometimes lead to the biggest triumphs. If we hadn’t made the errors and had just followed the normal startup script we would not be the company that we are now and the Trampery might never have got formed. Success and failure are inextricably linked.

How important is teaching children to code?

Whether it’s teaching children to code or just getting children curious enough that they want to try it themselves, it’s a valuable thing. They run children’s days at the London Hackspace on Kingsland Road and that’s not just about coding, it’s about playing with all kinds of electronics and lasers. This is a great focus – making physical devices come alive – because software development in isolation can be a bit abstract and forbidding. In everything to do with education, the more you can fire up the hunger to tamper and experiment, the better.

If you weren’t working in technology today, what would you be doing?

I’d like to write more, play more music and do more photography. The Trampery is a fervently interdisciplinary community and those are my ideals as well.