Sunday, 30 December 2007

What investors look for - on Dragons Den

Looking beyond the rough and tough entertainment of Dragons Den - here is what I took from the Christmas edition of the programme.

If you want to secure investment for a new idea or business and need to make a presentation to a group of Business Angels you will need to get yourself ready.

Going on TV is not the only way to raise money! See for example:

But wherever you go look for money you will need to make sure:

Your pitch needs to work

Get your pitch - presentation - to be excellent. You need clarity; a charismatic presentation and ensure you build your credibility through the pitch. More on this through the rest of the notes.

Appearance - look professional. Make some effort at this

Your presentation needs to be evidence based, succint and your own demeanour needs to be such that the investors take a liking to you. Because no matter how good your idea - if they do not like you for what ever reason - they just won't invest. It is their money!

The content of your pitch

Make sure you have a grasp of your figures. It is no good denying your knowledge of numbers. It is not rocket science. If you do not understand them - make sure you get a good quality tutorial from someone well versed in finance - especially in raising money.

Ensure you have a grasp of who your customers are - not just the overall market place. Go read a book on marketing if you do not understand the importance of this. Perhaps Geoffrey Moore's book - Crossing the Chasm will help you. Book shops are full of useful materials. As indeed are local Business Schools, full of bright students who can get some market research done for you.

If you are in a buy and sell or a make and sell business - ensure you know what the costs, sales prices, profits and volumes all mean.

If you are in a service business - where you are selling time - see how best you can generate enough sales to realistically cover your time and all the various incidental costs.

During the meeting

Be clear

Listen to the questions - make sure you understand them

Answer carefully - not impulsively

Avoid arguing or begging

Try not to avoid answering the question or become evasive - it only gets harder to retain credibility

Be realistic

There are two ways of gaining immediate attention from an investor - real customer interest in sufficient numbers or of sufficient calibre - to make it realistic. This is a very clear way of reducing the percieved risk.

When it comes to getting a valuation on a new company - bear in mind that what ever money you ask for - you will have to give away some of your equity - the question is what proportion of your company will you give in exchange for the amount of money you are asking for:

High valuation

Great team - with previous experience of business and of working together (serial entrpreneurs).

A proven market - hard evidence - not just assertions.

A well researched developed product - with secured intellectual property (patents) - and a proven market. Better still if you have a fully functional prototyle or some early trial customers who are prepared to endorse you and your product.

Mid level valuations

One team member is solid - others not so convinving - perhaps part-time, not put their own money in or not technically convincing.

No hard evidence of the market place - relying on metaphors, instinct - but perhaps experience and some endorsements verify the potential. In other words we can see a "market" but perhaps not "customers".

Product has been developed to an extent, but needs resources to get it to prototype and get patents sorted out.

Low level valuations

The idea is no more than a good idea

The inventor/entrepreneur seems to have potential but is unproven - is a first time entrpereneur

The investor is likely to be taking a high level of risk with the early stage idea

The product has only just moved beynd a conceptual level

The investor feels they will have to do all the work to get the product underway because of the lack of experience of the entrepreneur

No valuation what so ever

The pitch was rubbish

The product is whacky

You argued

The market is completely unproven - no sight of customers

It looks like a lifestyle business that is better run from a bedroom or kitchen

What happened to Italy - where have all the entrepreneurs gone?

I have been to Italy twice in two months. The first time this year was for a conference on entrepreneurship. The audience were tough! We had a small delegation from Cambridge made up of entrepreneurs, investors and IP lawyers. The idea was that we would provide some new information, inspiration and connections to make things happen.

I believe the audience was polite, listened to what we had to say, but I am not sure they wanted to believe any of what we said was possible! What we said was "you can do it if you want to"!! Well it took us a day to say this.

But - whatever the state of entrepreneurship policy, education or attitude - I love Italy! What I love most about it is the history, its past achievements and contributions to world progress. And oh yes - the food and wine!

It was with this second visit - the malaise of European entrepreneurship became frighteningly obvious! I will not get into the detail here - because that would be unkind to a country and a people I love. But there is a desperate need in Italy for the educated elite to get a grip on what they want to see happen to their country.

There is knowledge, sense of design and aesthetics. The people are smart, have great social skills. Maybe there is just too much complacency around.

What I would like to know is why is mainland Europe better as a historic tourist location than as a vibrant set of countries? Italy is just an example of what I see in other countries. And by the way this is possibly one of the reasons that UK still attracts more investment and attention from Indian businesses than the whole of mainland Europe. Remember the reaction to the Arcelor takeover?!

So - here is what I think does not help

Employment laws - you can't fire people if things go wrong
Tax laws - take too much off the entrepreneurs
Banks - are unconnected to the "SME" sector
The European Venture Capital industry - is not oriented to early stage businesses or high tech
There is an insufficient number of role models to inspire - individuals are not celebrated in the press - perhaps only those who break the law make it into the media!

Xenophobic attitude of politicians prevents high net worth, intellectuals from migrating to Europe. Clearly migration into Europe can become a major issue - if all the people who come are those who sell dodgy sun glasses on street corners.

But if mainland Europe want to progress at any where near the rate of progress of Silicon Valley - it will certainly have to look to being more open, encouraging diversity of attitudes, skills and probably teach English in all schools as a compulsory second language!

That is enough controversy for now!

Happy New Year

Tuesday, 18 December 2007

Fuelling an entrepreneurial economy needs talent - so is this Government mad?

UK Government is thinking of tightening the UK visa tourist visa regime. A country that has beenopen and has stared to benefit from such opennes is thinking about joining Fortress Europe! Oh Dear!

The detail is in the text I have taken from the Beeb - but before you read this think about the following:

Prof Amartya Sen (Nobel Prize winner) was Master of Trinity College - about as Establishement as it can get - and he always had an Indian passport! Meanwhile UK welcomed Stelios and he started easyjet - so imagine if it might be even remotely possible for an English man to go start an airline in Greece or Cyprus?? Unlikely! More recently - in Cambridge - we have had people relocate from Spain, France, India and elsewhere because the atmosphere of openness and opportunity is welcoming.

By taking this action (if it eventually does) - and expecting a Minister to try and explain this to Indians in a visit in February - this is a real faux pas! It just sends out the wrong signal to the talented young people that is crucially needed by Britain.

In various demographic studies - there is clear evidence that there is going to be a workforce shortage over the next 3 - 4 decades in Europe and a surplus in India. To maintain good relations and benefit from this balancing economic need - Britain and India will have to act in mature ways. Visa and immigration rules on both sides will have to keep an eye on teh future.

Here is the announcement:

Thursday, 13 December 2007

Corporate entrepreneurship at Virgin comics

Every so often - in the compnay of very senior managers from large organisations - you get the feeling that the term "entrepreneurship" or "entrepreneur" is a demon in their management jargon. This is a term that causes hostility and conversations that drift no where in particular. The term entrepreneur is regarded with some suspicion by managers.

But in reality as Prof Watson (Nottingham University) said - to make the distinction between entrepreneurship and management is to make a fatal distinction.
Entrepreneurs without management practices are as much a nightmare as are managers without an entrpreneurial spark within them.

Afterall how can you create new opportunities for organic growth, make mergers and acquisiions happen, develop new products and services without seeking to be innovative (i.e entrepreneurial).

Equally how can entrepreneurs - who might have great ideas and identify opporutnities make any of their dreams come alive without the disciplines of management?

So - the two skill sets need to sit alongside each other. And yesterday (12th December) I saw no better example than having run into Suresh Seetharaman of Virgin Comics. He and his colleagues have pulled together a remarkable team of creative people to develop new comics and animations by combining Indian and other legendary stories and bringing them to 21st century. When you look underneath the excitment of what they are creating - you can see that they have clearly closed the gap between "entrepreneurship and management" - they see no difference and thank goodness for such teams.

I wish them well!

Tuesday, 11 December 2007

Entrepreneurship as a social movement

There has been a seismic shift in many parts of the world where younger generations prefer to seek out enterprising opportunities rather than jobs for life. In many countries where ‘Generation Y’ is getting connected up on the new and rapidly growing social networks (e.g. ‘Facebook’; ‘MySpace’; ‘LinkedIn’, etc.), one can see aspirations changing in leaps and bounds.

In 1979 Mrs Thatcher started to demolish overweight, oversized organisations such as in shipping, steel, coal on the basis that Governments had no business to be in business. Although this caused social pain, out of this has come a new entrepreneurial class. Then (like it or not) came a climate in which free market economics started to win. But free enterprise is not always inclusive and, although economists talk of trickle down, this can sometimes be a really slow dribble.

In parallel with political and social reforms, we have also witnessed the growth of technology based businesses that have created excitement and buzz for young people everywhere. The ‘entrepreneurial generation’ want to become the next Narayanmurthy or Kiren Mazumdar rather than their employees.

As one of my family elders said, “Even educated people are going into business”. Research-based Institutions now have policies for Intellectual Property ownership. It is too early to assess the benefits but this is a really important first step as it signals to the research community that they too can be enterprising academics. An emerging story is the Simputer – the work of Professor Swami Manohar at the Indian Institute of Science in Bangalore.

Entrepreneurship comes in many forms, when people bring the same set of skills, know-how and drive for creating a social or civic change. In other words, entrepreneurship goes beyond the notion of start-ups - something which (highly paid) blue chip managers have not yet fully understood. However, a few organisations (like Proctor and Gamble and Unilever) are talking about “open innovation” where R+D is now seen in a more boundary-less manner, requiring very different skill sets, systems and behaviours. These are early first steps towards being more entrepreneurial.

Entrepreneurship is complex, takes time, is not fully understood and better aimed at helping people unlock their own capability and drive. Sadly there are ill-informed misconceptions like entrepreneurs are born, risk takers, lucky or rely on serendipity. None of these can be proved in a systematic way! And if one subscribes to them there is not much point in having an educational system!

Instead, one needs a robust view of entrepreneurship development which focuses on five inter-related aspects:

(1) Raising awareness of inner motivation is the first step.
(2) This can lead to entrepreneurial intent which increases alertness to opportunity. This is tempered by a combination of;
(3) Business skills and know-how (necessary conditions of success) and balanced by
(4) Risk appetite
(5) Finally, the entrepreneur needs an opportunity which triggers a desire to succeed and outweighs the fear of failure.

In combining all these so-called soft factors, individuals emerge with a real sense of self-belief and confidence.

These qualities need an entrepreneurial ecosystem enabled by local, social networks for mentoring, investments, team members, legal and financial expertise and routes to clients and suppliers.

At the Centre for Entrepreneurial Learning (CfEL), where we base our work on these principles, we have seen results in terms of personal and business achievement. For a start, numbers have grown. In 2001, we attracted 30 – 40 people to our Enterprise Tuesday course. Now we get over 250 people per week. Another programme called ‘Ignite’ (aimed at aspiring entrepreneurs with solid tech-based business ideas) has expanded from 20 local delegates to over 50 from 14 countries in 2007. The evidence of a social movement is not only the macro data, but is front of us on a daily basis. And, we have the joy of seeing real changes taking place as a result of our work. For example;

Dr Paul Goldsmith, an alumnus of Ignite, started Daniolabs using zebra fish in neuroscience. The company has grown enough to achieve an exit for its investors. After participating in our 2005 Enterprisers programme, Stuart Mitchell turned down a highly paid job offer from HM Treasury to establish Fivez, a 5-aside football business working with disadvantaged children in Scotland. He has made a huge local difference and started up another business. Rachel Whitehouse, a former MBA student, took an entrepreneurship course and went on to lead an internal venture in the banking sector. She was hired for her entrepreneurial skills and confidence.

We can see the growing aspiration for enterprising careers and the growth in institutions, websites and people who are there to help and support. The spirit of enterprise is certainly spreading!

Sunday, 9 December 2007

Indian Venture Capital is growing fast

I have been asked to speak at the University of Bath on the topic of entrepreneurship in India. as part of the research (helpfully conducted by UK-India Business council) we found a recent update on the venture capital scene in India. It is strongly based on knowledge based industries and from "no-where" it is rising at great speed. I will leave it to you to click your way through the detail.

Meanwhile - this evidence points to the notion of entrepreneurship become much more of a social movement and is getting past the stage of being a politician's after dinner speech. More people want to start the sort of companies they work for - especially in India. The growth of inspirational role modes shows that technical education can lead to a propserous life style where one can "do well by doing good".

Monday, 26 November 2007

26th November - Dragons Den – Questions, Intuition and drilling into vague answers.

Having watched tonight’s episode – I tried following the questions that were asked and some of the comments that were made. Maybe this will enable future entrepreneurs to ask themselves some of the questions and prepare themselves better – if not for TV – at least for investment propositions.

Feel free to add to these questions. What was clear was that the Dragons started with fairly obvious questions – and allowed their intuition, vast experience and detail undertsnading of certain sectors to drill deeper.

What they could not take was an exaggerated valuation from a former investment banker with an MBA!

Here is a headline question:

Does a frozen pitch lead to a loss of credibility?

Theatre Company

If I give you £50k what do I get back
Have you picked those figures from think air? Or what have you got confirmed bookings?
What will make the show stand out from the dozens of others? What is different from all the others you are doing?
Are you taking a show that you have developed at Center Parks and take it to the outside world….What is unique about it
How many Theatres would you play at? (Ans 80)
How much have you allocated in terms of marketing for 80 different locations (£25k)
Is this really enough?

The Graveyard is full of good shows that have not made money and I am afraid that you do not have a new business model – it looks like a failure

I thought your show idea was brilliant – but it can’t turn itself into a business – so I am out.

You have not persuaded me you can make any money so I am out

I do not think your show was that great – and also for the (poor) numbers I am out.

Super digger for children

What is to stop copy-cat dealers

Needs too much money to get it going and is easily copied. All Dragons are out.

Entrepreneurs are not allowed to take notes into the den – they must have all the facts in their heads.

£145k for 10% for Steri Spray

What are the markets? – Hospitals, gyms, schools, showers are fitted where duty of care is required.

Are you saying that LD affected water hits the shower – do you not still have a problem that the bacteria is still in the water – say in the tanks.

What progress have you made so far?

We need to get to a production ready state.
I have filed patents (in many countries)

What is the patent for?

The technology

How costly is it compared to other shower heads? So there is a £50 premium on your taps.

They see inventors have difficulty in pitching their ideas and this one is no different

How may do you expect to sell?

What margins do you expect to make on that?

On the gross and on the net??

With 77% GM – you would have a huge margin so,
Why did not you not work out that if you drop your margin – you could sell your hugely better product at the same price as existing and inferior products – it would be a no-brainer as an investment proposal.

What is unique?
Competition has a filter – holds back bacteria, costs £x and lasts only 3 weeks.
e.g. Hospitals there are 1.5million filtered taps out there in hospitals
At last – the real answer!

Ian I like it – your valuationis crazy (10%)

I will offer you £145k for 40% of business (Deborah and Theo)

Entrepreneur holds his ground by asking of anyone else was interested to co-invest.

Passion, evidence of market need/technology leadership and endeavour overcomes the lack of business experience

He gets his investment after the grilling.

Home Party business

Part plan is a growing sector

How unique is this – then ripped into.

Tournament with a Twist

Foot ball in a swamp – started in Finland….

How can anyone want to do it?
Are you taking the micky?
Looks fun, but I can’t see a return so I am out – as is everyone.

“Yes Super Baby”
10% for £175k

What you wear can stimulate your children.
Ex MBA, investment banker, management consultant – became a mother realised the need for functional fun clothes for young mothers.

Attach bits to clothes - colourful and fun
Have a patent and trademarks
Vision to create a brand for Yes Super Baby – sensory stimulation for babies

Can I look at your scarf?

What have you sold so far? Have you sold anything yet?
I have sold 136 products to parents (£1600)
You were an investment banker before - So how do you get your valuation?
I talked to an expert who values start-ups..
He has put in £50k; I have put in £45k
I cannot believe that someone with your background can be so naïve!
She has aliented James with an unrealistic valuation
This opportunity is as inviting as a holiday in Afganistan! Not for me – maybe for you!
I cannot believe you were a professional advising on valuations. I can’t treat you seriously as an ionvestee possibility.
(Blasted a banker for getting the valuation so wrong)

Who wears? Parents wearing
Parents hand over to nursery staff to create some level of continuity
(I do not believe it says Duncan)
The thing is that kids have a short attention span – not sure what is more ridiculous – the valuation or the design?

Valuation is ridiculous, concept is ridiculous and the product is ridiculous you should stop right away
Deborah – You stand and present very credibly. But what you present is not credible…
Concept is somewhat disturbing (I am not a child psychologist) to make the mother both the mother and the toy. It is an addition – to stimulate.
Not a healthy development
I think the idea is brilliant – I have three young kids – this stuff will sell.
I would have invested in this – I wish you had asked for the right amount and the right valuation. But I am not going to….
Dragons do not get any prior prep..

So – no questions – but the entrepreneur managed (quickly) to alienate all the Dragons with an over inflated valuation while presenting herself as a professional.

Food company – Caribbean ready meals

Samples of ready meals
Husband will take it from here
150 recipes from the Caribbean
No artificial colouring or other chemicals
We have super market deals
We need the money for relocating, new packaging etc.,

£100k for 20%

Who is the biggest customer –
We are in 34 stores in Asda?
Is your product in 34 stores in ASda

The other is Morrisons
14 stores now stock it

Who are the entrepreneurs?
Used to be a fashion model
From industry – the shop failed –shut it down
Husband – fashion designer - Not going to make enough money went into sales

In 8 months sold £ half million. Expect to sell £1.5m in the next few months.
Do you have repeat orders – in the pipeline for you to triple sales?
Do you have this information in the bag (no)
Where will the 3 times sales come from if these are not in the bag?
Can you tell me what you have with the clients?

Our product is produced in a factory – outsourced to a supplier.
Why do you want to own the factory. It will cost you a lot of money – why –
Want control

What is the real issue?
We have a distribution problem?

Why have you not gone to other suppliers?
Morrisons – the product has proved itself but they want a reliable supplier
Probably more issues to come to light

What does the company you have outsourced to charge you?

They charge us £1.30 – we sell at £1.60
How much do you pay for packaging? 18p packaging
Delivery – who pays for that – We do at 12p per pack
It costs for £1.60 and sell it for £1.60

Business is easy, buy for less and sell for more – you are not making in money!

The manufacturing deal they have signed up to – does not allow them to make any money

There is not one good reason to invest – other than the taste of the food
You have not shown you understand business

Sunday, 25 November 2007

Awakening Italian Enterprise

A small group of people familiar with entrepreneurship development in cambridge were invited to a day long semiar in Milan - by Il SOle 24 ore - the Financial Times of Italy. The participants from Italy included academics, managers of incubation centres, post docs, and doctoral students from science and technology..

They were certainly high calibre people at the cutting edge of their scientific disciplines.

But what happened to the spirit - the spirit of Italy that we see everywhere else? In football, sport, design, motor racing, the auto industry, design, fashion, food and so much else from Italy?

Is it that the scholarly culture of Italy is so far removed from the day to day of Italy or that Institutions have been set up to deliberatly extinguish the spirit of the people engaged in the pursuit of curiosity. One is of course tempted to think of the fate of Galileo or other "heretics" who challenged the orthodoxy of their period.

I want to know if there is a light burning in Italy and how it can be used to encourage the greater engagement of enterprise amongst such talented people?

Monday, 19 November 2007

Silicon Valley comes to Cambridge

Last week we had a dozen or so top entrepreneurs from Silicon Valley come to Cambridge. It was a real eye opener - in terms of seeing what and how business is being done in Silicon Valley. All the talk was about web 2.0 and manyspeakers referred to "faith and belief" in terms of making money! So - the question is - how many of todays start-ups in this "space" willa ctually succeed and will investors do it all again - have they already forgotten the dot com bubble?

Whatever happens the revolution is here and exciting!

As an educator the question is - what should we be teaching future entrepreneurs about how to gerenate the ideas and evetually monetise the ideas in this virtual world?