An unexpected slice of success
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You cannot spend long in Cambridge before coming across a technology obsessive. On the road into town from the railway station, a young man is bragging to his friends that his mobile can do so many things that it is more of “sonic screwdriver” than phone. His friend’s iPhone, meanwhile, is dismissed as “far too sleek”.
The exchange seems fitting given that the purpose of visiting Cambridge, the heart of the UK’s so-called Silicon Fen, is to see Eben Upton, the entrepreneurial brain behind the Raspberry Pi. This pocket-sized computer with a £24 pricetag has been praised by digital trendsetters and technology enthusiasts alike, including Google’s executive chairman Eric Schmidt, for its sheer versatility in being put to a multiplicity of uses, its affordability and innovativeness.
But the device has raised an issue that tends not to get discussed amid all the nerdish eagerness: does Mr Upton have a viable commercial model? Or is the Raspberry Pi destined to suffer the fate of other clever British computing innovations that failed to scale globally, such as Sir Clive Sinclair’s ZX Spectrum or Acorn’s BBC Micro, both created by Cambridge technologists?
“If we screw it up now we’re doubly stupid because things are going really well for us,” Mr Upton says. “Maybe this is the complaint and the criticism of British companies – that we don’t make Googles. But we do make a lot of small, very innovative companies rather than maybe a small number of very big companies.” Mr Upton recently won the Financial Times One to Watch prize at Founders Forum, the entrepreneurship event.
In its basic form, the Raspberry Pi looks like a circuit board with a USB and Ethernet connector soldered on, but what has everyone excited is that a device that appears half finished can be manipulated by amateurs to solve a multitude of practical problems – as has been done by organisations and hobbyists alike. The Kenya Wildlife Service has used a batch of Raspberry Pis as a low-cost way to control hidden cameras that keep track of endangered animals. In south Wales, a Raspberry Pi has been programmed to operate the test rig in the factory where the devices are made because it is cheaper and faster than on a PC.
Raspberry Pi has sold 1.6m units since it began trading in March 2012. That represents “respectable volumes for anything that is not a mobile phone or a tablet”, Mr Upton says.
Sitting at the Cambridge headquarters, there is little sign of that soaraway success in the room at the back of the office building where the eight full-time staff are tapping away on PCs. A pile of computer parts in a corner is the only obvious sign that this is even a technology business.
Mr Upton is one of a group of six who set up the Raspberry Pi Foundation as a charity in 2009, out of concern at the lack of programmers in the UK. Foundation members include Alan Mycroft, a professor at Cambridge’s Computer Laboratory, and Jack Lang, entrepreneur in residence at the university’s Judge Business School.
Mr Upton was born in 1978, four years before the BBC’s The Computer Programme introduced a generation to programming. Before Raspberry Pi, he had set up two mobile phone games businesses: Podfun, now dissolved, and Ideaworks3D, whose titles include Call of Duty: Black Ops Zombies and Lara Croft and the Guardian of Light, and which now trades as Marmalade Game Studio.
That experience indicated Mr Upton should run Raspberry Pi’s business operations. Even so, the early sales success of his latest venture suggests it could be much bigger than his previous efforts. Before the Raspberry Pi launched, Mr Upton estimated a “dream lifetime” total of 10,000 orders. It is now selling 3,000 units a day.
Leaning back in his chair, Mr Upton exudes the calm confidence of a founder who knows he may have hit the jackpot. However, there is also a hint of worry that the whole enterprise may become too big to handle: “I don’t think any of us expected the volume and last year we all had to pull together just to deal with the supply chain implications of that kind of shock level of demand.”
The co-founders had raised about $250,000, enough to build 10,000 units. But orders on the first day reached 10 times that. Prevented from raising more capital in the traditional way by the not-for-profit status of the parent foundation, the team scrabbled for another, capital-light business model to ramp up production.
Rather than making the Raspberry Pi themselves, they plumped for a royalties model. They struck a deal with RS Components and Premier Farnell, two UK-based electrical component distributors, to oversee production and give Mr Upton’s team a percentage on every device sold. So far, Raspberry Pi has received roughly $4m of royalty income.
It is a similar model to that of chipmaker Arm Holdings, one of the UK’s most successful technology companies. “That pivot, where we went from being a manufacturer to being a licensing company, is probably the thing that has been the engine that has propelled the success of the business,” says Mr Upton. “We would have ended up drowning in customer service requests.”
There is, however, a disadvantage to licensing the technology: a lot of other companies are making money from value that Raspberry Pi Trading has forgone. Two companies that make cases for the device already accrue more revenue and profit than Raspberry Pi.
Mr Upton does not seem overly concerned. He points out that he is not in it to make money and emphasises that, as a business within a charity, Raspberry Pi makes a surplus not a profit, which supports the core aim of encouraging children to programme.
His investors, meanwhile, see it as the type of collaborative model that enables small companies to have a big footprint. Sherry Coutu, who has backed more than 45 technology start-ups and sits on the Raspberry Pi board, notes that RS Components and Premier Farnell are big companies with global distribution networks. “I am a huge fan of strategic alliances in the tech sector and think that this is a gorgeous example of one,” she says.
Nevertheless, Raspberry Pi is still in its early stages. “If you look at the sizes of the average number of people participating on Raspberry Pi blogs, the number of countries we could go to, we could double the business through the educational market alone,” Mr Upton says. “I think selling a million a year into education while also selling a million a year into hobbyists is not completely unachievable. The hobbyist may taper off a bit but I think doubling it is not impossible.”
Back at the railway station, waiting passengers are staring at their smartphones. They might be using the devices to find the right platform for their train. Or maybe, like Mr Upton, they just love technology.
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