Revolutionising the shipping industry with AI

May 10, 2023

James Kellet, co-founder of Spotship, talks about how his company leverages AI to help ship brokers better manage their business.

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Revolutionising the shipping industry with AI

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In this episode, James Kellet, co-founder of Spotship, talks about how his company leverages AI to help ship brokers better manage their business. Spotship aims to bring shipping into the 21st century by cutting a six-man day process down to just two hours, all spent interacting with the client.

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Charles Brecque: Welcome to the Tech Story Podcast, a place where we interview founders and people in tech building really interesting and exciting businesses. Today, I'm really excited to welcome James Kellet on the show. James is the co-founder and co c of Spotship, a company which leverages AI to help ship brokers better manage their business. James, thank you for taking the time to be on the show. Would you like to please share a bit of background about yourself and Spotship?

James Kellet: Of course. Thank you very much for having me, Shell. So, as you said, I'm one of the two founders of Spotship, and we are trying to bring shipping into the 21st century. So the hope is, with our platform, we cut a six man day process down to just 2 hours. All of that was spent interacting with the client. And because we enable optimisation of vessel choice rather than just satisfying, we're hoping to save the world 90 million tons of CO2 a year and the industry $25 billion in cost. Wow.

Charles Brecque: And all of that thanks to AI?

James Kellet: So AI is at the core of our data ingestion, and then we also make use of it in terms of what we call our CO2 forecasting engine, which is a CNN model. And we also have another piece which we call the destination parser, which cleans up what captains write on their daily report, which you'd be surprised to know, captains aren't particularly interested in making what they type into their satellite comms, particularly legible by machines.

Charles Brecque: That's really interesting. And you have a background in finance. So how did you end up co-founding Spotship?

James Kellet:I would describe it all as a very happy accident. So I spent the first seven years in equity hedge funds, starting at a fund called Orbis, which I think might be the best performing fund in the world. So about 9% alpha over 50 years. Very interesting place to train and focus, I would say, on the absolute core fundamentals of businesses. And the style there was called intrinsic value investing rather than just value investing. And it was about and it sounds like common sense, but you'd be surprised in the investment world that not everyone is doing this, but focusing on buying businesses for substantially less than they were worth. You could say it's a throwback to the Warren Buffett days, a very long way away from the kind of AI driven hedge funds of today that trade very quickly. This would normally be ten year time horizons or even longer. So that was the kind of grounding which I would say has shaped the way I think about things and also shaped the type of businesses I'm interested in getting involved with. And then I was lucky to form a friendship with Herman Herman Narula, the founder of Improbable. So I joined him for a while on what I would call a mad adventure. Great to see the inside of probably one of the highest growth and most well known startups in the UK. And that gave me the bug for not only working in startups, but building something from day zero. And so Henry and I joined forces. Henry is my co-founder. Shortly afterwards, he had the original idea. So between the army where he was captain in the Grenadier Guards, and his time at Amazon, he actually spent a fairly short period of time in a ship brokerage firm. And he was just appalled at the lack of technology. So he was hoping that compared to the military, civilian tech would be much more forward thinking. I mean, Henry has some great things to say about his time in the military, but you won't hear him praising the technology, specifically the computer technology. He felt it was quite backwards. So he came out expecting wonderful, wonderful things. And he talked about saying, could we use simulation to try and optimize vessel choices? And his MD on the desk said, we've already got that. Come around here. And he showed him an Excel spreadsheet that was six months out of date. With such insights as, this ship is in the Atlantic. I guess because it was six months out of date, it means it was in the Atlantic. God only knows where it is now. And at that point, Henry thought, there's got to be something better than that. So he brought the idea to me, and obviously, as a bit of a cynic, I didn't believe it. So we then camped outside a pub in Malibu, actually, where there was a shipbroker's office above it. And Shipbrokers, well, it's fair to say shipbroking is thirsty work, so they enjoyed their evening pints and we would ambush them there. And it turns out things were more or less exactly as Henry had seen them, and there was a real opportunity to speed these processes up and bring them to modern day.

Charles Brecque: That's a fascinating story, and I guess so much when it comes to finding a startup idea and launching, is timing. It's luck, and sometimes it's very random. Before starting Legislate, I didn't think I'd start a legal tech company. I don't have a background in law, but I was amazed at how inefficient contracting was and the whole pain around tracking the data in the contract.

James Kellet: Was there a moment that really triggered it, where you were like, this cannot stay this way.

Charles Brecque: The moment, well, it happened more than once in the space of three months, was that we were losing contracts post legal negotiation, meaning contracts being approved by the buyer. It goes through a procurement and legal process, and then at the end of that, two, three months have gone by, but the buyer is no longer there, the buyer's lost budget or the buyer's been promoted. And that was really painful. So that, for me, was the tipping point. But the reality is, I also didn't think my idea was a business until I was very casually talking about it to one of my mentors on a walk. And then he became our first angel investor and said, you should research this and check there are no competitors, check that this approach doesn't exist and everything sort of aligned. And then after I couldn't get the idea out of my head.

James Kellet: Amazing.

Charles Brecque: Yeah. Well, that's really fascinating. And so, since Starting Spotship, what's been your favorite moment so far?

James Kellet: That's a difficult one, I'd say there's obviously recency bias is going to affect this quite badly. Looking back, just to pick out a couple rather than choose one because they're all special, I would say the first client revenue was a client called Cockfield Night. They took the platform, I would say when it was in a very experimental phase, they helped us iterate to get it better. That was just when somebody actually trusts you, paying up for a piece of tech that nobody has ever paid for before, that was when it started feeling real for me as somebody who hadn't done it before. When we had our first ever angel check come in was a similar moment, I would say not quite as exciting as the first client money, but it did come first, and that was a lady called Charlotte Mason, who actually taught me an entrepreneurship boot camp when I was at business school at NCID. So that was to have her vindicating the beliefs that we were building something exciting that helped on the confidence front. And then more recently, I would say we've had two, three great moments. I can't reveal who they were, but winning our first, what I would call tier One global brokerage firm, after about five months of iterating with them on an unpaid basis, that's when we took the step, I would say, from what I think of as a startup to a scale up. And then that's been accompanied by two more recent things. Probably the one that I feel the most for at the moment was the promotion, internal promotion of Mark Hardwick, who came on board as an engineer, senior engineer to VP of engineering, that kind of moment where we felt we now had a world class engineering team led really well. Because Henry and I, neither of us are technical founders, so we've always had that gap until very recently. And while Mark isn't a founder, he's now on the executive team, he's now really helping us steer the direction of the company. And then we've had really recently just this amazing kind of I don't know, it just a brilliant moment where we were named the most investable business amongst the NCL alumni community globally in front of about 800 people a couple of weeks ago, which has resulted in the biggest inflow of investment I could ever imagine. So it really does feel while an institution that has incubated the likes of Sender, the likes of Blah blah Car, when they say, this is our next big business and some of the big name angels from that community start investing almost with no questions. This really makes you feel the momentum. This is a head rush, but it is wow. You also feel the responsibility. You don't want to let this community down when they've chosen you that way.

Charles Brecque: Congratulations. And I also think whether it's pitching to a client or to an investor, when obviously questions are good, but when they just get it, I think it's really rewarding because it means that they truly understand the problem and that they truly believe in you. So congrats on winning that.

James Kellet: Thank you very much.

Charles Brecque: And I guess since starting Spotship, what do you wish you had known and what maybe is it that you didn't know that you wish you had known before starting the company?

James Kellet: That is a difficult question. So I'd say the obvious one is everything usually takes a lot longer than you expect it to take, particularly in terms of tech development. Hitting tight timelines is really difficult and seeing a platform come together. I would say what we've achieved over the last year and a half in terms of platform development, we know because we've shown it to people who we haven't shown it to for a year and a half has been unbelievable. But when you're in the trenches talking about we need this thing in three weeks time, almost certainly not going to be three weeks time, it's going to be six weeks time or eight weeks time. So I think that would have been helpful. I also think the seasonality is something I really didn't anticipate coming into this. So as an equity analyst, I thought of the seasonality of things like you expect retail businesses to often make their bumper quarter coming into Christmas when people are present shopping. But as a B to B enterprise SaaS business who is essentially being judged on revenue growth, what you find is your customers aren't in the office during summer or the period around Christmas. And these times I would say I made an idiot of myself last summer. Every week we missed a target. Adding that onto the following week, acting like a crazed slave driver with a sales team that was trying really hard, kind of Xerxes style, beating the ocean, just so pointless. So this year we're actually trying to do something different. Where we are treating August as a month where we're very much going to be half power. We're encouraging people to take really long holidays, two weeks to three weeks, but we're putting a holiday ban on either side of August. So there's a two week time in September, 2 weeks at the end of July, where we want everybody there and it's almost like school holidays. We're trying to create a line in the sand. Will this work? I don't know, but it feels less stupid than what we did last year. So hopefully I won't be telling you next year. Having a holiday ban in late July and early September is what I wish I'd known before I started a startup.

Charles Brecque: Yeah, no, it's a really interesting insight and obviously when your clients are on holidays, you can obviously plan, but there's only so much planning you can do and it definitely makes sense to sync up your calendars. But the other tip is if ever you do have a B to B solution that can be sold anywhere in the world, at one point, I did have a manager who would in the summer say, when are you getting those sales done? And the only thing I could do was reach out to Australia. And I ended up getting some clients in Australia because during our summer, it's their winter and I guess that's how you could sort of counterbalance some of the cyclicality. But it's easier said than done.

James Kellet: Yeah, no, that's definitely right. I think shipbroking is an interesting industry because Europe and the Middle East is still very much dominant. Singapore is strong, but we found because a lot of the shipbrokers in Singapore are expats, often they're following a European summer. We do have some really great clients in India, but we've found sales cycles in India can be frustratingly long. And last year there was a big stream of special one off national holidays in India in the summer, so we did think of that. Unfortunately, it didn't work. So I'm quite excited to encourage everybody to have a long holiday, which is probably my flip side of encouraging people to work through the weekend if needed. So it might be that we get head to something that looks a bit more like work life balance for the sponsorship sales team.

Charles Brecque: Great, well, best of luck for that. And you've been building this company, working with brokers, and now you are reaching this status of scale up. What's the vision and plan for the next three to five years?

James Kellet: So there's a concept that we call the nexus of shipping, that is this conceptual crossroads where it's decided how and when a cargo will move from A to B. And we believe this is the single most important moment in global trade and we want to be the only core data and analysis partner to all of the principles in that transaction. So the ship broker, the owner, the charterer, we don't want them to need any information we can't give them and any service we can't provide them for. So a few things that we're very excited about is providing things like vessel performance histories, so we're already gathering that through the platform and also tagging on cargo insurance at the point of transaction and also building up commodity trade indices, looking at action on the platform to forecast, actually where the hotspots are going to be around the world for trading commodities. And this is impossible anywhere except our platform. So that's why we've started with the brokers. I think when we were talking about this business three years ago, everybody said, yeah, it's a no brainer that this moment is very important and everybody would love to capture it, but how do you monetise it? We're not getting that pushback anymore. People are only asking the question, can you get to that nexus of shipping? And I think we've already had some green shoots outside of our core broker market that suggest we are getting there. For me, if we can get to nexus of shipping, we will be one of the largest companies on the planet. So this will blow straight through decacorn status. So that is exciting. I would say when I'm walking between meetings, that's what really gets me going. And I feel for a lot of our venture scale investors, that's what they're most excited about. How do you make sure you get to the nexus of shipping? And I think for that to happen, the key next step is becoming that trusted digital assistant to ship brokers everywhere. So we think the nexus of shipping vision becomes possible when we have about 5% of the broker market. So that's where we're running towards. Substantially less than that gets us to a series A and we're hoping to do that around the beginning of next year. So I guess it's sprint to being the best possible partner for ship brokers, grow that market more and then see the markets around that really flowering. In terms of headcount, it's obviously hiring central both in sales and marketing and also in the developer side. We have about two pods of engineers today. We want to scale up to having six to seven pods. So we're really able to tackle multiple different problems simultaneously.

Charles Brecque: That's really exciting. And I imagine with all this data on ships, then ultimately you're right. You don't just need to sell to brokers, you might be able to sell to hedge funds or insurers. So that's really interesting. And with all this growth, also hiring is something you mentioned. What are some of the key lessons that you've learned? And especially for founders listening to the episode or new founders or prospective founders, what tips can you share on hiring?

James Kellet: So I've not had good experiences with headhunters or paid recruiters so far. I'm sure there exist good headhunters and paid recruiters. I think that the people we've dealt with have been skilled at their jobs. But the problem is that the people that come into these guys nets are typically people who are not on that absolute vertical career trajectory of somebody who is a true rock star. And that's going to be for, I would say, one of two reasons. Either they don't fit well in the organisation they're currently in, which would mean if it's an organisation that looks a bit like Spotship, one that we respect, they probably wouldn't fit too well with us. Or alternatively, these could be very good people, but these are not the absolute top talent in their area. And those are the people we're looking to attract. So what we've started doing instead, and this doesn't work at the very early days, is hiring for potential and fit with little regard to what the actual gaps are within Spotship and Spotship as an organisation moves around the people. I would say we've now been doing that for about a year and we've made some of the best hires of the company's history that way. It's not in any way scalable, it involves Henry Me, Fede, Mark Hardwick out a lot, speaking to people in the startup community, seeing who is excited about our vision and seeing who we think would thrive in the spotship culture. So one of the people who joined us from an investment bank, Jack, who I would say is a true Ten X engineer, he loves solving problems, front end engineering problems. He doesn't like being micromanaged and told what to do. So we managed to find somebody with all of that potential in an organization, I would say in an investing landscape we quite admired, but whose software engineering culture was not like ours. So we were able to put him in a space where he had that freedom, but also the responsibility. And I think a lot of people want rewards, they like titles, but I don't think that many people actually want responsibility for their actions and those are the people we want to find. Just not easy. It's a one by one thing. So I think a kind of core part of a spot shipper's responsibility going forward is finding more spot shippers. That's how it becomes scalable. But at the very start, if you need a front end engineer, you need a front end engineer so that's when you fall into the trap of instead of saying, how do I find brilliant people who will grow with us and help us grow, you say, how do I find somebody who can do this? And I think that there's almost no way around it. I guess if you're thinking of starting a startup, the best thing you can do is just broaden your network across all the skills you could possibly need. But even then, I don't think it'll be enough.

Charles Brecque: Yeah. No, I agree. When you're in the early days, you sort of have to take what sticks because you're relatively unknown. You might not be super well funded and the types of people who are willing to bet on you are great at the moment, but they might not necessarily want to grow with the business or align with your fit or culture. And I guess especially in the early days, it's a bit of a chicken egg problem and sometimes you do get lucky and it does work, but if it doesn't, it doesn't and that's it. But I agree. Scaling well, as you scale hiring more individuals who will sort of contribute in the direction you want, it's a real challenge. But I think, yeah, having spot shippers, spot future spot shippers.

James Kellet: Spot shippers. Spot, spot shippers.

Charles Brecque: Yeah, exactly. I think that sounds like a great strategy and I think if you're building the right culture, then that can happen. So, great piece of wisdom. And as a busy founder, CEO, I imagine you must come across quite a few contracts. So what are the key legal documents you come across and what pain or frustration do you have with them?

James Kellet: So I would say one. Well, let me break it down into three. So, off the back of this wonderful NC ad alumni forum news. At the moment, the documents that are hitting me left, right and center are subscription agreements for investors, which is a high quality problem to have. But at the moment I am customising all of those myself. And what needs to go in is investors name and address in different boulding in three different points, number of shares and ticket size and email. And this doesn't take a long time, particularly if I already know the share numbers for the size they're doing. But I would say you obviously don't want to make a mistake with this kind of document because you look pretty silly. So maybe 15 minutes per document for me to do it, check it, send it to Henry, who then DocuSigns it. So if there was a way for me to type into a box the investor's name and address and number of share or investment amount once and it were to auto populate that and send that out by DocuSign, at the moment, I'd have saved maybe 15 hours over the last week. So that would be a great one. I think we then have employee contracts, which employee contracts aren't actually options agreements that every time we kind of come to a new round or we have some due diligence done on us, those have to be regathered. And we've had recently for tax valuations, had to put out things about the auction schemes, et cetera. I feel doing that would be one of those tasks I really wouldn't want to dive into, so being able to extract all of that information would be useful. And then we have customer contracts, end user license agreements, which at the moment I feel haven't been causing us too much grief. The terms are somewhat non standard, so I would imagine coming into Series A, that's going to give either me or Henry a bit of a headache.

Charles Brecque: It seems like when you talk about customising contracts, even if the contract is simple and relatively standard and you only are just changing the name and then a couple of variables, it does take time because you don't want to make a mistake and then the cost of making a mistake is also quite high. And when you're doing multiple in a batch, if ever you have a doubt, you need to check all of them again. And I think this specific use case is something that our platform does quite well because it is just a question of entering values in a box. But if ever you want to find that contract, which maybe you were giving out 500 stock options or whatever, then you can filter across all your contracts based on that one value, as opposed to needing to go through all of them, extracting the data, putting it to a spreadsheet and then going back to the spreadsheet. Because, as you pointed out earlier, with the story behind Spotship, spreadsheets quickly become six months out of date. And that's something which, I guess, with our platform, you don't need to worry about.

James Kellet: No, that sounds really useful. And it's actually the customer contracts that I'm thinking of most, that we actually have the salespeople fill those out. So, for me, the last time we did a tax valuation, I had to chase four separate people for contracts, many of which had actually not been electronically signed. So there were scans of things and then typed them into a spreadsheet. So it wasn't even just taking the data out of them, it was actually gathering the contracts wasn't easy. And by the end of this year, I think we would expect to have maybe 100 times the contract signed that we did at the last valuation. So if the last valuation was painful, this could be horrendous.

Charles Brecque: Yeah, well, another interesting thing about Spotship is you're a fully distributed and remote company. Is this something that you'd recommend other founders do? What have been the benefits and maybe inconveniences, of building a remote company?

James Kellet: Yeah, that's a really interesting one, because I think we didn't choose to be a remote company. We're COVID babies. So we made our first hires in late 2020, and I think the idea originally was to get an office very quickly, but we found some of the core benefits of remote is our ability to hire from a global talent pool, rather than a UK only talent pool. And while I think recently the market, employment market, particularly for engineers, has softened slightly with the funding kind of carnage that's happened, and the problems with the listed companies as well, I would say from early 2022 and before, the hiring market was just so tight, going out and finding those incredible engineers very difficult in the UK. Whereas in Poland, where we've made two hires so far, and we're going to actually expand the team there substantially, we really like the culture. The kind of underlying work ethic, I think, is, on average, better than the UK. I think in the UK, there's a massive spread, right? So you get some unbelievably hardworking engineers and some engineers who are more suited to easier jobs, but I would say, on average, you do better. In Poland, I think there's just this incredible pride in working for an international high growth startup, whereas there's perhaps more of an entitlement amongst some people in the UK. So it just brings this positive energy, this unstoppable work ethic. So we've actually said for engineering, we want to mainly hire in Poland, but then we kind of broke that when we came across Mark. And I guess that comes to the heart of what this remote only model is. We can hire anywhere in any country, and our team in the Philippines allowed us to establish round the clock 24/7 customer support at a very early stage in a way we'd have never been able to do with the UK. And we've seen our team there grow. We're about to make a range of promotions there, so we're developing careers there. Henry flew out quite recently. I'm due to fly out in a couple of months. It's amazing to have this kind of rich cultural tapestry, and it also aligns with what I believe in the NC Ed values. That diversity of background gives diversity of thought gives better outcomes for clients and investors, and we will get an office at some point, but I worry what that might do to the culture, because at the moment, everybody's the same. We do have our junior guys are clamouring for an office because they want to spend more time with each other, but when we do it, we know it's a risk. So we're thinking about how we can do that in a way that continues to capture all of our advantages and doesn't open us up to that two class citizen type problem that a lot of other companies have experienced, where you have the people who come into the office and the people who don't. One of the things we've done to date so while we do say we are fully remote, we fly Spotship Europe into London roundabout once a month and do a largely silly activity. So we do the crazy golf. We've done ax throwing. And I would say while Spotship is normally very careful on what it spends, this is a highlight for most Spotshipers months. So there we are. I wouldn't say we go wild, but we really take it very, very seriously and people have a fantastic time. So we did ice skating last time where people got to watch henry and I look truly terrified on thin ice, which I feel was a nice experience for people. And some of our engineers were former professional ice skaters, which set a nice dynamic. It really breaks down the walls. And I feel until you've met people in person a few times, particularly in a casual way, it's very difficult to have those tough conversations about resolving interpersonal disputes at work. And I would say this kind of silliness is what has enabled us to have those conversations and kind of live our values of being very transparent, very straightforward and very maneuverist. And it's one of the things that I would say people join Spotship for, which is crazy, but it's a leg of our culture that's very important to us.

Charles Brecque: Yeah, no, that sounds really interesting. I mean, in our case. Our software team is based in Spain and that's also a result of the pandemic. But I agree on the diversity of thought because it means that we get completely different perspectives and we bring different perspectives of them. And then there is also that appeal of working for a high growth international startup. So I can definitely see the benefits. But we do have an office and I do recommend you do.

James Kellet:I mean, your WeWork does look fantastic, but I would actually say one of the things these kinds of rare sessions have enabled us to do is as well add this spot chip flavor. So my background in hedge funds, Henry in the Grenadier Guards, we're a bit more formal sometimes than certain startups, so we can be silly, but Spotship is a company that occasionally likes to dress up. So we have our Christmas dinner in the Cavalry and Guards Club with everyone wearing a suit and tie. I can't imagine there's more than another five startups in the world that have this kind of thing. And when people first arrive, they often think this is really weird. Some people might be intimidated by it, but everyone who's gone to one, it becomes the highlight of their year and it really creates this difference and this uniqueness and it's almost like a safe bubble. I don't want to use the word cult and I think the way Uber did it in a kind of us versus them, that's really toxic. We don't want to have baddies and villains, but we do want to say we're different, we feel different. If you're going to plunge into Spotship, you kind of have to embrace this stuff. And I think that's enabled us to have this unique flavor without having an adversary, which I think might be uniquely positive. And that's one of the key reasons we've had 0% voluntary turnover over 24 months, which is unheard of. I feel very proud of what we've been able to do in a bunch of quite idiosyncratic ways.

Charles Brecque: That's really fascinating. And I definitely recommend formal dinners. And I remember when you invited me to where I had to wear a student tie and I didn't have one and I was very sad I couldn't come. But I think when I was in Oxford there were formal dinners and definitely a highlight.

James Kellet: No, we'll do it again. You'll have to come. Great.

Charles Brecque: And I guess if you were to give one piece of advice to someone who's considering a path in entrepreneurship, what would it be?

James Kellet: I think the most important one is just to do it. Most people stop due to analysis paralysis. There's very few reasons not to really have a go at entrepreneurship. And I think people also worry, how will employers view entrepreneurship? Having talked to a big contingent of angels in some of the world's top serious employers, from the kind of Googles of the world to the McKinsey's to the Goldman Sachs they view entrepreneurship incredibly positively. So the worst that can happen if you take assuming your personal circumstances allow and you're not having to support a family, I would say, or have some demands on you that mean you can't take a financial risk for six months. I would actually say the worst that can happen, total failure will be viewed quite positively from the outside. So the opportunity cost is so much lower than most people think it is. So have a go.

Charles Brecque: Great piece of advice and something I strongly recommend as well, because I think you don't know until you do it. And I think once you're there doing it, then some things might be easy, some things might be hard, but what counts is that you're doing it and you're developing unique experiences that will be valued by future employers, if ever you unfortunately need to find an employer.

James Kellet: And I don't think that they're wrong to value it right. I don't know your experience, but I've found there is no role I've ever done or could imagine doing that would pressure me into growing at this rate. And it's an amazing feeling when you look back at what you're capable of as a founder after two years in the trenches versus before you started.

Charles Brecque: Absolutely. Well, thank you very much, James, for coming on the Tech Story podcast, sharing your journey, building spotship and all these unique insights from hiring, building a remote team. Best of luck scaling spotship, and I look forward to seeing how you grow.

James Kellet: Thank you very much. It's been a pleasure.

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