Greg Jackson has built Octopus Energy into an international powerhouse within the past six years. Its cloud platform enables the startup to offer customers cheaper deals for more sustainable electricity, which has arguably made it the UK’s fifth biggest energy retailer.
“And we’re on the heels of number four,” Jackson tells Verdict.
Since launching Octopus Energy in 2015, the company has licensed its smart grid solution, Kraken, into several countries, has over 2.5 million customers and over 1,600 employees.
However, the explosive staff growth has happened without Jackson feeling the need to formally create an HR department. Doing so, he fears, would just slow down the business.
“The more departments you put in a company, the less agile the company becomes because each department creates its own machinery and creates more work for every other department,” the Octopus Energy CEO argues. “So we just have fewer departments. That’s exciting.”
Instead of a formal HR department, he likens the structure to that of a cluster of startups within a company, with each manager working as the all-in-one leader of their teams akin to how startup founders would operate.
“A company with 10 or 20 people doesn’t have an HR department or an HR person,” he says. “The manager or managers need to learn how to manage people. And what you tend to spot if you go to small companies is a really great relationship across the company, everyone is close to management.”
Jackson partly attributes the growth of Octopus Energy to this structure, arguing that it has made the startup more agile, nurtured a healthy working culture and that the approach enables the company to nip issues in the bud because managers take responsibility for their and their employees’ wellbeing.
When asked about what would happen if an employee had an issue with their line manager, Jackson says they are free to take it higher up the chain and that he himself is always available to chat.
“If there’s a problem every employee, [no matter how] junior, can reach out as high as they need,” he says.
But that, Jackson claims, is a rare thing to happen.
“If a manager is taking responsibility and everything’s transparent, then they tend to sort things out and look after their people better and have fewer problems,” he adds.
However, not everyone seems to agree. While employer review website Glassdoor is rife with five-star testimonials seemingly backing the Octopus Energy CEO’s version, a few of the reviews suggest that this approach may create a nature of favouritism.
“Absolutely hardly any career/salary progression unless you bum lick managers,” as one reviewer put it.
Jackson brushes off these reviews as basically inconsequential. “There are always going to be some people who are unhappy, but these sorts of reviews are hugely outnumbered by the positives,” he says, adding that “though negatives are the minority we still follow up every one of them – not through a separate function but as a responsibility of the most senior people.”
How Octopus Energy started
Jackson makes no secret about why he founded Octopus Energy. He says he hates bad customer service almost as much as he despises paying too much for things.
Unsurprisingly, the series of events that would lead to him starting the startup kicked off when he got his first energy bill after moving into a new house. “It was really high,” Jackson recalls.
Shocked, he phoned up the provider, who immediately cut the bill. The representative denied having overcharged him and argued that Jackson had been on a deemed rate as he’d just moved house and didn’t have a contract with the provider yet.
One year later, the same thing happened again without Jackson moving house. This time the new expensive bill was due to his contract having run out after just one year.
“I said, ‘Hang on. So I have to phone you every year otherwise the contract expires and you put in your high prices?’ And they said, ‘Yeah,’” Jackson says. “So I changed to another company and guess what; they did the same thing.”
Events like these caused him to research the market further. What he found shocked him. Not only did he think CEOs at the big six energy providers seemingly blamed their own customers for not communicating with them enough, but also that they didn’t do enough to protect the environment.
“That’s ridiculous,” Jackson says. “How can you blame the customer for the fact that you hike the prices? Don’t blame them, blame yourself.”
It also upset him, thinking back on his childhood. “My mum was a single mum with three kids, and we lived with a very low income and energy bills were a hugely stressful thing,” Jackson recalls.
Putting these things together made him realise that something had to change. Having clocked up time as the founder at connected home startup HomeServe Alliance, he was confident he had the entrepreneurial flair to make it happen.
The same can be said for Stuart Jackson, Jackson’s co-founder who now serves as Octopus Energy’s CFO. Their initial research revealed that there was certainly a way to innovate in the UK energy market. There was only one thing holding him back: money.
“If we were going to build a truly disruptive company that had the chance to be successful, we needed seed funding of £10m,” he says. “And that’s quite a lot of seed funding for people who’ve never worked in the energy sector before.”
Discouraged, they decided to put the project on ice for three years until Jackson happened to have a cup of tea with Simon Rogerson, founder of Octopus Ventures, the venture capital arm of the Octopus Group, in 2015.
Jackson says that the conversation was about something completely different, but that the chat made him realise that Rogerson “was a perfect investor” as Octopus Renewables was rapidly becoming one of Europe’s biggest investors in solar energy.
“I thought, hang on, he should back this business,” the Octopus Energy CEO says. “So we literally spent an hour chatting about other things and right at the end I said ‘By the way, I’ve got an idea.’ And I think it was only like five or six weeks later that we agreed on a deal.”
Unleash the Kraken
Since that serendipitous meeting, Octopus Energy has become one of the leaders in the UK energy sector. Having raised two funding rounds worth a total of $577m in 2020, the company now boasts a valuation of $2.2bn. Central to this growth is Octopus Energy’s cloud platform, Kraken.
“Kraken is a cloud based platform for the future of energy,” Jackson says, explaining that part of the platform enables it to efficiently manage customer relationships through billing and the like.
However, Kraken’s other qualities become evident when the Octopus CEO begins to describe how it helps keep customers’ prices down and leverages big data to become a force for decarbonisation.
Simply put, Kraken takes things like weather forecasts into account in order to gauge the availability of renewable energy and adjust the prices accordingly.
“We’re going from a world of mini-cabs to a world that looks like Uber where we’re using real time pricing to match supply and demand at a really granular level,” Jackson says.
Octopus Energy is not alone. The startup is one of several companies active in the digitalisation of the energy sector where smart grids provide customers with better and more responsive services, as noted in a recent report from GlobalData.
Apart from using Kraken to support Octopus Energy’s own services, it also licenses the platform to energy retailers in Australia, New Zealand, Japan, Germany, the US and Spain.
E.ON UK is one of the companies Kraken has been licensed to. In March 2020, just as the pandemic was sweeping in across the globe, the energy provider said it would migrate two million former power customers to the platform. It completed the migration in May this year.
“In that time, their headcount fell by a factor of four,” Jackson claims. “There was a 75% reduction in headcount and customer satisfaction went from 1.45 to 4.4, out of five. And their losses went from €200m to a €100m profit.”
Octopus Energy is not profitable yet and Jackson says the startup isn’t planning on being so any time soon as it is constantly reinvesting into the company to scale the business and to accelerate the adoption of green energy.
To that end, Octopus Energy invested in and opened a new research hub in Manchester in November 2020 through the acquisition of Upside Energy, an energy software company.
The new hub will play a part in achieving Octopus Energy’s ambition of making the UK the “Silicon Valley of Energy.” It will help develop the smart grid technologies required for a green energy system and the electrification of transport and heating.
It also ties in with the Octopus Energy CEO’s big goal: scaling the company, which is what he’ll focus on in the immediate future.
“There is no point being in the decarbonisation industry and being small because we’ve got to make a difference,” Jackson says. “So for us, rapidly serving millions of customers is critical and not just in the UK, but around the world. We have to grow the business.”