Nearly two decades after building hedgehog lab into one of the North East’s tech success stories, Sarat Pediredla thought his days of launching companies were behind him.
After stepping away from the business in January, he was looking forward to finally “slowing down” and spending time with family.
“I leave with immense gratitude, pride and joy. Titles change. Chapters close. But once you learn to be the hedgehog, you never quite stop,” he said in his announcement at the time.
The succession had been carefully planned over several years before Malcolm Seagrave took over as CEO.
But despite embracing semi-retirement, Pediredla says he couldn’t ignore what he believes has been one of the biggest technological shifts since the arrival of the smartphone.
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Just a few months later, it seems Pediredla’s own words have come full circle as ‘you never quite stop’ as an entrepreneur. He’s now back on the tech scene with LevelFive, a new Newcastle-based ‘AI-native’ digital product studio built around a belief that AI is fundamentally changing how software is built and, ultimately, how consultancies themselves should operate.
“When I started hedgehog lab, it was very much about mobile and this new technology that no one really knew how to harness,” he tells Prolific North.
“Late November to early December 2025, I was thinking: ‘That’s it. I’m done forever.’ Then Anthropic released a new AI model. AI has completely disrupted the industry in the last six months.”
That feeling immediately reminded him of the early days of hedgehog lab.
“It was like when mobile phones had their Apple moment in the 2000s. I think we’ve had our Apple moment with AI. But even then, I didn’t really intend to do anything.”
Fast forward to the first week of May and he was having dinner with Alan Morris, hedgehog lab’s former CTO, someone he has worked alongside for years.
As the pair discussed how quickly AI was changing software development, one question kept popping up: if technology had changed so dramatically, why hadn’t the consultancy model changed with it?
“We looked at each other and said: ‘Why don’t we start a consultancy?’ It just seemed like the right time to do this.”
That conversation became the starting point for LevelFive. The Newcastle-based consultancy now works with businesses to design and build bespoke software and digital products, using AI to reduce the time and cost involved.
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Because AI helps a much smaller team to complete work that once required far more people and time, the pair believe they can replace the traditional day-rate consultancy model with fixed prices. That means no more rate cards and making bespoke software more accessible to businesses that have traditionally found it too expensive.
“Our first week was so successful, we’ve generated a record pipeline. We’re having so many conversations. That’s why I know it’s the right business for the right time. I wouldn’t have gone back into consultancy if this wasn’t something truly disruptive.”
“Humans are critical to this”
He says LevelFive is “fully AI-enabled”, but not in the way many businesses currently claim to be.
“Everybody says they use AI but we’re a two-person operation. Our finances run using AI, our customer service is run using it. Everything is AI, and that rapidly changes the consultancy business model,” he explains.
But despite building a business around AI, Pediredla is keen to challenge what he sees as one of the biggest misconceptions.
“This is not about AI doing everything and humans not existing, right? In fact, our tagline is ‘agent-led delivery, human-led judgement’. Humans are critical to this, but I guess the old agency model of needing to hire hundreds of people to make money is disrupted. The model has to change.”
Rather than replacing people altogether, he believes AI will support small, experienced teams to build significantly more software than before.
That view is reflected in recent Office for National Statistics (ONS) data, which found businesses are mainly adapting to AI by training and retraining existing staff rather than through external hiring or large-scale restructuring.
“Change is coming. We’ll deliver more software, and we’ll still have the same amount of people. But people will have to reconsider how they charge and how they run their businesses,” he says.
“We don’t necessarily know how this plays out, but for me that’s the exciting bit, to be at the start of that disruption.
“The technology itself is not the new thing. It’s the business model and how we work. Who knows, in two years’ time it might not work out, but right now we’re super optimistic about it. It’s enabling productivity.”
“We want to democratise software”
But for Pediredla, changing how consultancies operate is only part of the big opportunity AI presents.
“We’re keen on impact and we think software has become something that’s only available to the big companies, right? If you want to do something with software, it’s expensive, it’s tedious and it takes a lot of time. It needs specialist skills,” he explains.
“We want to democratise software and underpin the productivity gain, not just in the North East, but in the UK.”
His argument is that if AI reduces both the time and cost involved in developing software, smaller and mid-sized businesses should be able to invest in technology that has traditionally been out of reach.
That could have particular significance for businesses in the North East, where Pediredla believes AI could help smaller teams and a lower population compete on productivity with much larger tech hubs.
“I think this is a similar opportunity for the North East, and a great example of how a lower population doesn’t matter. If you harness AI in the right way, a smaller population can still deliver the same amount of productivity.”
Ask him what success looks like for LevelFive in two years’ time and the answer is not simply a revenue or headcount target.
“We’re not bothered about the number of people and revenue, not that they don’t matter. If you do good work and we end up doing more work, of course we’d love to create more jobs. The more employment we create, the more revenue we generate,” he says.
“But for us, it’s all about impact. We’d like to think we’ve democratised software for smaller and mid-market businesses. I hope I’ll be talking about the hundreds of businesses we’ve helped to increase sales, improve productivity, hire more people and make more profit.
“It’s not about building a fake headcount or generating £10m in revenue. If that is a by-product of making an impact using AI, because that’s what we believe in, AI unlocking British productivity, then I think we can still have success in the next couple of years.”
Beyond that ambition, he would like LevelFive to become a template for how agencies and consultancies might operate in the future.
“I had a call from a client the other day that asked for a rate card. We don’t do them. Unless you’ve been at an agency for eight years, you don’t understand how disruptive that is.
“It’s a very new way of thinking and it’s going to make a lot of people uncomfortable.
“I don’t think we will be for everybody. But change has to come someday. And I think we’re about 12 months ahead of it.”
