Entrepreneurial Advice, Motivation & Startup Strategies

This may sound counter intuitive but failure can be seen as a positive when it comes to seeking investment. Investors, particularly of the Angel variety share an empathy with entrepreneurs who’s previous risks haven’t led to the rewards they hoped for. Failure in this context shows the investor that you have made mistakes and learned from them, therefore strengthening your credibility.

The Total Meltdown

You’ve successfully raised millions in capital, employed many people, invested in premises and then it goes bang and all comes crashing down around you. These “Total Meltdowns” often get the most attention and the founders are often highly criticised which is more often than not totally unwarranted. Founders should be praised for having the Big Cojones to go all out to make a difference.

The Empty Fuel Tank

Most common reasons for business failure are often due to the business running out of fuel. Perhaps there have been a series of small failures which culminates in collapse. Perhaps the sales process wasn’t tight enough, or the market didn’t quite understand the proposition. Typically in these scenarios the business runs out of money or the founders simply lose energy due to all the set backs.

The Lost Opportunity

This one is sometimes hard to live with, the business hasn’t failed like above, it is still opperational and making profits. However perhaps taking early stage funding, seeking out that expansion capital to exploit an open vertical or raising equity finance could of led to huge growth potential.

A big reason behind forming Edge Venture was to enable businesses to quickly capitalise on their opportunities and realise their true growth potential, but all the financial assistance in the world will not compensate for lack of energy and enthusiasm born out of previous failures. Embrace failure and learn from it, don’t let setbacks get you down and grasp every opportunity that comes your way.

You have no doubt read and heard that barriers to entry are very important to investors when they are considering business ideas to back. It would be nice for every business to be in a position to have strong barriers to entry from the beginning.

However it’s relatively rare to be in a position to have a sustainable barriers to entry from the outset especially as it is becoming easier to duplicate technology or find ways around patents.

I believe it is preferable to focus on building the barriers to entry within the business, for example:

• Operating the business
• Having customers
• Good links with suppliers
• Press attention
• Creating a brand

These all create barriers to entry, perhaps not in the traditional sense but they do add serious value to your proposition in the eyes of the investor, and are things that every business can capitalise on when seeking investment.

I recently watched an interesting interview which I thought I would share. The interview discusses how Walid Al Saqqaf and Sokratis Papafloratos went about securing $1 million for a London based startup, trustedplaces.com.

I am actually a member of Trustedplaces, the website allows you to recommend restaurants to others and build up a social network of like minded restaurant goers. The site isn’t specifically focused on restaurant reviews but it would appear that is the direction the users are taking the site.

The interview covers some interesting points about raising angel money and how they went about raising $1m in 83 days. Some of the more interesting responses were to the questions What are investors looking for? When is the right time to raise money? and Do you still feel in control?

Definately inspirational stuff, it’s great to hear about fellow Londoner’s making a dent in the social space.

Catch the interview here on intruders.tv

Earlier this week I attended the Startups Live event in London. Unfortunately the event did desend in to a Microsoft sales pitch at one point but the highlight of the evening was a light-hearted, motivational talk from Micheal Smith, one of the founders of firebox.com, a highly successful UK based Gadget & Boys Toys ecommerce website.

The Firebox founders both left college to pursue corporate careers but it wasn’t long before they came to the realisation that working in a corporate environment wasn’t for them. They loved gadgets and knew there was money to be made online.

Off they went to knock on the banks doors for startup funding, only to be knocked back time after time. (I’m sure the banks regret their reticence now) Stuck with no startup capital they made the brave choice to volunteer for medical experiments!

10 Experimental Injections later…

They spent their time in hospital fleshing out their business plans and spent their “earnings” totaling £800/$1600 setting up the website and developing a prototype for their own invention, a chess drinking game.

They are now a multi-million dollar ecommerce success story.

Now I’m not suggesting that every entrepreneur go to the extremes of volunteering for medical experiments to fund their startup but this story is a great example of an entrepreneur going to great lengths to realise their entrepreneurial dreams.

Fortunately to use the Edge Venture pitching system we don’t require you test any drugs.

I was talking with an ex colleague of mine over a few beers last night and we were debating the merits of protecting your business ideas from copy cat rivals. It got me thinking about many of the current internet success stories and how their lack of any real IP hasn’t stopped them becoming multi-billion dollar companies.

We have this TV show here in the UK called Dragon’s Den. The concept, for those that don’t know, is you need to present your investment idea to a panel of “Dragons” and you must walk away with all the money on the table (The money is literally on the table) or you walk away with nothing. It’s pretty entertaining TV, you can tell that the producers pick businesses that aren’t at all prepared to make it more enjoyable for the viewer (unfortunately it’s the British way to like to see others make a fool of themselves I am afraid to say).

What I find quite interesting is the same negotiation point coming up again and again. The Dragon’s use the lack of IP protection as a way to make outrageous equity demands in return for disproportionate funding. It is true that a lot of the investment opportunities featured on Dragon’s Den are product related and therefore Patent protection is favourable. However where does that leave those of us with internet ideas or other service businesses that can’t be protected?

It is worth remembering that Dragon’s Den is a TV show and that in the real world it is very probable that the lack of IP protection of a new internet startup will make little difference to those forward thinking, new-breed investors looking for the next big thing on the internet.

Market Traction

I believe that market traction can make lack of IP irrelevant. An example I have used before is eBay, they were the first to build up the network of online auction users. No matter how much money Yahoo! threw at their online auction platform they couldn’t catch up with eBay’s market traction. Subsequently Yahoo! scrapped their version of eBay after spending millions promoting it.

The list doesn’t stop at eBay, the majority of the online successes haven’t any real IP in the traditional sense, the only thing stopping others creating a clone and competing is the dedicated following these websites already have. Dedicated, loyal user base equals market traction.

When launching a new internet venture special focus should be made to increase the “stickyness” especially if it is a unique concept, these initial early adopters will be your evangalists and help you build a very loyal user base which are stuck to your website like superglue, no matter what copy cat competitors comes along.

I think the British equity investment market is slightly different from that of the US, hence why we at Edge Venture have decided to go full global with our investment pitching system. We have a lot of creative talent in the UK and I am sure given the right vehicle we can attract some investment from US VC’s and Angels in to the UK. Maybe that will shake things up a bit and make the reliance on IP protection less of an issue for UK investors.

Do you consider yourself to be a doer or a thinker? Doers concentrate on the day to day operational aspects of a business, they often concentrate on working on their to do lists, micromanaging ever aspect of the business and keeping control of every minute detail.

On the other hand thinkers delegate, they don’t concern themselves with every minor detail and most importantly they think.

Now I’m not saying that doers don’t think, or that doers aren’t a necessary element to any businesses success. If it wasn’t for those with the “doer” mentality nothing would get done. The thinking entrepreneur is one that steps away from the day to day running of the business and dedicates time to strategy and planning.

I’m sure we can all think of at least one business owner we know who is so engrossed in the running of the company that they seem to at best be standing still, this treadmill effect comes from the need for that business owner to be consulted on every minute detail and the business owners own need to be in control.

Before the whole coffee phenomenon, there were many “doers” running small coffee shops. One small coffee shop owner in Seattle had that “thinker” mindset, he understood the need to step back to think about the bigger picture, the strategy behind what they were doing. This entrepreneur built what is today the global institution known as Starbucks.

What I am saying is that the founder, the guy running the business should have this thinker mindset. Of course the doer aspect shouldn’t be neglected but the entrepreneur needs to be constantly thinking about strategy and not be concerned about releasing a little decision making control to employees.

So can an entrepreneur be both a doer and a thinker? I’d say this is a must but entrepreneurs should consider setting aside at least one full day to work on strategy and business development in every working week if not more. If this means delegating decision making power to an employee then you really should think about doing this.

Ultimately it should be your goal to be 100% strategy and business development, let others run the business for you, you have the entrepreneurial spirit, the drive to succeed, surely your energies should be applied where they will be most effective, in driving business growth.