The Story of Founder of Coffee Nation, Martin Davis

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Being around Martyn Dawes when he is getting enthusiastic
about something can be a rather alarming experience.
He says: ‘I have a habit of making a very strange noise
when I get very excited. It sounds a bit like the noise Al
Pacino makes in the film  Scent of a Woman. It invariably
makes people jump, particularly if they are on the phone.’
Dawes has much to be excited about right now. He
recently sold his business Coffee Nation, which was
selling more than 750,000 cups of coffee a month from its
self-service machines, for £23 million.
Born in Coventry, Dawes was adopted at six weeks old by
a couple who were unable to have children of their own. He
says: ‘I was their whole focus and a lot of love and encour-
agement came my way.’
But Dawes was always restless, caused partly, he now
thinks, by uncertainty over his origins. ‘I wanted to get out
there and show what I could do. I had a need to prove
myself. I think it was a way of compensating for not knowing
where I came from.’

He was so keen to get started that he dropped out of
college halfway through his A levels at the age of 17 to work
for a local foundry where his father worked. In his spare
time he took flying lessons and dreamed of becoming a pilot.
But his dream was shattered when he discovered he was
colour blind. So at the age of 21 he got a job with Massey
Ferguson, the tractor maker.
He did well but after a year he met his future wife, Trudi,
and decided to move to London to be with her. He set up on his
own as a self-employed management consultant for engineer-
ing companies and soon discovered he had a knack for it.
He says: ‘When you are 23 you have a wonderful sort of
arrogance and inbuilt self-confidence because you haven’t
had the experience that says you could get your fingers
burned.’
Within six months he had started up his own consultancy,
and soon his wife, who worked in human resources, joined
him.

The consultancy did well, but by the time Dawes was 28 he
was getting restless. He says: ‘I have got a very low boredom
threshold and I realised that consulting was not really what I
loved doing. I could see that businesses interested me more
than consulting did.’
So he took £50,000 out of the consultancy business and
started looking around for inspiration to start up a business
of his own. It was, however, harder than he thought. He
says: ‘It is very hard to find something when you don’t know
what you are looking for. I would get knots in my stomach
because I was so scared.’
He briefly considered buying a clothing company that had
gone bust, and also looked into the idea of opening a chain of
workplace children’s nurseries. He says: ‘I looked at every-
thing. I literally had a blank sheet of paper in front of me.’
One day he read an article in a newspaper about a
company which was doing well by putting photocopiers
into newsagents and corner shops. It got him thinking.
He says: ‘I liked the idea of a business model in which you
could generate a little bit of revenue from lots of different
places. That way you would not be reliant on any one of
them too much and would never be really exposed to one
customer. And you would be using the foot traffic of people
already going into those stores.’

He decided to visit the United States in search of inspira-
tion, starting in New York and then heading for Minneapolis,
which at the time had the biggest shopping mall in the
world. While he was there Dawes initially toyed with the
idea of becoming the UK franchisee for a frozen yoghurt
business. But at the last minute he realised that it might not
be such a good idea because the sun does not shine much in
England. He was also entranced by a restaurant called The
Screening Room which contained several tiny cinemas for
groups of friends to watch films together. But he quickly
realised that to open something similar in the UK would
involve a huge investment of capital.
His big idea eventually came to him when he was stand-
ing in a local New York convenience store. He noticed that
large numbers of people were coming in simply to buy a cup
of coffee to take away and realised that there might be a
similar demand for takeaway coffee in the UK too. Following
the photocopier business model he had read about, he would
install instant coffee machines in corner shops and give a
percentage of the money earned from the machine to the
shop owner.

Back home in the UK, Dawes got to work. He persuaded
four independent corner shops to take his machines, which
he filled with instant coffee powder and powdered milk. But
he quickly discovered that not many people actually wanted
to buy instant coffee from a machine in a grubby little shop.
He says: ‘I remember walking through Peckham thinking
what the hell am I doing? It was the wrong product in the
wrong shops in the wrong location.’
So he started putting his instant coffee machines into
larger convenience stores such as Spar and Alldays. But by
1997 he realised that the product and the location were still
wrong. He says: ‘I was selling 50–60 cups a week but that
was never going to spin the wheel.’
His personal life also took a nosedive. He and his wife sepa-
rated and Dawes found himself sleeping on friends’ floors.

Then one day he was standing near one of his machines
talking to customers when one of them said something that
hit a nerve. Dawes says: ‘The man said to me, “Why would I
spend 59p on a cup of coffee when I can go back to the office
and put the kettle on? If you want to sell me something in a
store like this it has got to really excite me.”’
Dawes suddenly realised the answer to his business prob-
lems was to provide machines that made real coffee with fresh
milk. So he persuaded a couple of manufacturers to lend him
a few genuine espresso machines to try out, and quickly saw
sales improve. ‘It was a eureka moment. I felt fantastic.’
Unfortunately, his euphoria did not last long. By this time
he had come to the end of his £50,000 and had no money left.
He went to see an insolvency practitioner at his accountant’s
firm for advice on winding up the company. But while he was
there he happened to bump into an adviser who thought he
might be able to find investors for Dawes’ business.

So Dawes quickly wrote a business plan and was given
the chance to pitch at a forum for investors. By the end of the
day he had secured investment of £100,000 in return for
20 per cent of the company’s equity. That unlocked the door
to a £90,000 bank loan – and Dawes was back in business. He
began to find better sites for his machines and two years
later managed to raise £4 million from venture capitalists to
invest in growing the company, leaving him with a 25 per
cent stake.
His Coffee Nation gourmet coffee stations are now in over
400 outlets including Tesco stores and Welcome Break
motorway services, where they serve real espresso coffee
made with fresh milk and fresh coffee beans. Dawes has also
installed his machines in Odeon Cinemas and W H Smith
outlets in airports and stations, and has expanded through-
out mainland Europe. In 2008 Dawes sold the business to
private equity firm Milestone Capital for £23 million.
Now 42, Dawes is immensely proud of what he has
achieved. He says: ‘I was tempted to give up many times.

But if you do and somebody else makes it with your idea,
you have got the rest of your life to kick yourself and think
of what might have been.’
He credits his ex-wife Trudi with much of his success and
giving him the drive to succeed, saying: ‘She was and contin-
ues to be an enormous source of inspiration to me. When I
first became self-employed at the age of 23 she could see in
me what I couldn’t see in myself. I would not be where I am
today, and I wouldn’t have the confidence or the self-belief
without her.’ They are set to re-marry.
Dawes has also succeeded in resolving much of his rest-
less search for his true identity. Eight years ago he finally
met his birth mother for the first time. To his surprise he
discovered she is something of an entrepreneur herself and
runs her own corporate gift business.
He says: ‘When I met her I could see exactly the same traits
in her as in me, and it has enabled me to relax a bit with
myself. I had always thought, why am I like this, why do I
always want more? And now I know.’

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