Tuesday, 25 November 2008

Keeping it affordable – how to get started in a recession

Reshma Sohoni – CEO of Seedcamp gave a talk to students at Cambridge on Enterprise Tuesday. Her perspective was that on the whole startup costs had come down by a factor of 10 – especially in software ventures, because there was so much more open source available, many more tools, platforms and other forms of incubation.
For example – with infrastructure:
– Hosting - Amazon Web Services, Google App Engine, Cloud Computing in general
– Software, Design, Technology – Sun Startup, MSFT BizSpark, Open Source, Assembla.com, 99Designs, Creative Commons
– Office Space – Sun Startup, Silicon Roundabout (Moo), Work where you live
– Marketing – Learn SEO, Befriend the bloggers (Zemanta), Become an expert (Mobclix)
– Go virtual as long as possible and avoid office rent, furniture, and phone expenses
And a mindset that says – we need to control costs – be innovative and grow a business by being resourceful was the central message of Seedcamp.
So the examples included:
– Core team should include developers and business development
– Initial hires should be for equity + salary to cover rent and basic food
– Biz Dev and other advisors for equity not fees
– Product - Use your users to iterate and help build your product
– Rent instead of buy;
– Outsource what’s not core;
Her exception was with lawyers and accountants – which she she advocated getting good ones.

Tuesday, 18 November 2008

Tell tale signs of opportunity – surviving the economic winter

When the world is in crisis – it is easy to talk yourself into a gloomy “do nothing” period of inactivity. But is this what entrepreneurs do?
At the moment the reality is that it is hard to find money to get going, customers willing to commit to purchasing anything, budgets that can be signed-off for pilot projects. We even risk current projects being cancelled and the aftermath of senior CEOs from “Bell weather” companies making statements that clearly suggest caution over enterprise!
So, when Dr Hermann Hauser says that the clear signs of a big opportunity is when you can see fast (big) growing markets, have a star team and possess defensible IP (or know how) can see the presence of money in the form of good quality venture capital within a supportive cluster – you look around at the moment and think - No Way!
But – Hermann has been involved in 62 start-ups – four of which have exceeded $1bn valuation – so apart from the macro indicators what else can an entrepreneur see that we can’t?
First – the entrepreneur can see High Quality people – with ideas and the ability to make things happen. Exceptional technology or exceptional ability to articulate a proposition.
Secondly – to ensure that the entrepreneur is in an ecosystem that is conducive to entrepreneurship – and in the case of tech entrepreneurship these would be Silicon Valley, Boston, Cambridge for example. Or if you were trading in spices – you would be on the spice route!! Andy Richards – a Cambridge biotech entrepreneur said that Cambridge was a low risk environment in which to do high risk ventures or as someone else put it les flaterringly – a cluster can be seen as a compost heap – where – when firms die the people are re-cycled!
Sometimes the cold business logic does not always deliver the right answers – for example AT+T were turned off mobile phones, IBM believed there would only ever by a market place for 4 computers and there have been many other gaffes over the decades! A particularly seismic event in technology transfer history is captured in the events that followed the publication of work on the monoclonal antibody. http://eprints.ucl.ac.uk/2079/1/wit1.pdf . In the first instance those in decision making positions did not believe that this work should be patented and only later realized the potential of this work in industrial and commercial terms.
In summary we come to belief, passion and a deep understanding of the opportunity (not just the technology). These together with skills to find opportunities, resources and the ability to chip away at customers and markets may be exactly the qualities we need right now in an economic winter.

Wednesday, 12 November 2008

Going global means thinking global

As an entrepreneur there are some choices to be made. First of all – do you want to build a global business or go for a more lifestyle business? Both are good – but the consequences of the next steps are very different. Lord Karan Bilimoria who has built Cobra Beer from an idea to a growing force in beer brands explained his philosophies, strategies and tactics in how he has built Cobra Beer so far.
Here are some of his thoughts:
Whatever size of business you plan or dream about – the first step is to make a decision to do it and to get on with it. When you are thinking about doing it – you will need emotional support from people around you, but more frequently you might hear the term NO than the term YES.
In reality no one thinks you stand a chance when you are young because you lack track record, credibility, finance and any sense of authority over any resources. “What did I know about brewing, branding or building a business when I graduated as a Lawyer from Cambridge?” What you need though is incredible levels of self-belief and faith in your idea and you only need to be able to turn a few key people in your favour and the others will follow. In my case I got the owner of Mysore Breweries and the brew-master to believe in my idea. I owe them a huge debt of gratitude.
When you have faith in your idea and belief – it does not matter when you start a business. "In my case I started during the last recession in the early 1990s. So I have been there and am convinced that in hard times there are opportunities which others do not or cannot see. So this is the time you can get underway. And it is in this situation that you have to be able to spot the right trends. In our case it was seeing the rapid growth of Indian restaurants in the UK – a trend line demonstrating that UK was becoming a nation of curryholics".
If we combine this understanding of where the market is going and use this information with imagination – in our case we focused hard on it (See Geoffrey Moore’s book on Crossing the Chasm) we can grow at a tremendous rate. We have grown from the early years of a single beer – albeit the best – to now having a product range of 35 items.
You also have to think global – right from the start. When we began ale was 99% of the market. Now it is barely 25% - the rest is Lager. So we are part of that global trend towards lagers. And within this we focused on a fast growing restaurant sector. We describe ourselves as a British company of Indian origin.
Raising money for a global business is complex, but there are so many sources of finance – starting ofcourse with your own money, creditors, debts of various kinds, private investors, grants, careful cash management, customers’ advance payments, bills of lading, venture capital and stock markets. You need to understand the breadth of options and get someone who can help you navigate these various sources with imagination.
Building an A-team. This is stated often by entrepreneurs. In essence the definition used here is to take on people better than you are at specified jobs – such as marketing, sales, finance and other functional specialisms. Although entrepreneurs love to be involved with all aspects of a business – their passion overcomes their own need to delegate – one of the early lessons is to let go to grow.
Marketing is crucial for a global business. In the early days it is important to use Guerilla marketing tactics. Use PR, low cost sponsorships, get samples out there into the market – let people try your services, products – until you establish credibility and enough good will. Then you need to get a strategy based on excellence of product/service; a clear understanding of why you set prices the way you do against competition; ensuring people can access you and your products and building excellent customer service.
Constant drive for restless innovation. Sometimes a core product may not suit all market segments and to get into global markets and grow aggressively the company needs to build in the capacity for constant innovation of products, processes, imagery, marketing, rewards. You need an open mind to succeed. The personal qualities of the senior team needs to be one of taking risks and having foresight and sometimes you ask yourself – why has no one done this before?!
But to know if things are working and to check that your company is being successful – you have to be able to measure everything. You need a transparent system for measurement so everyone can understand what is going on in the business and play their part in the success.

Monday, 3 November 2008

Understanding customers needs – The story of Viagogo

As we run into a brick wall of uncertainty in the world of entrepreneurship – I can remember the last time there was a kind of melt down. It had been caused by dangerous over-speculation on the web. I had been told – it’s not cash flow and customers – it’s about the number of clicks and eyeballs!
Well – 8 years later only a handful of companies have made money out of clicks – Google being a star examplar. In the end they too have to be measured by cash flows. What a relief for common sense.
So in the lecture by Eric Baker from Viagogo – a product of Harvard, Stanford, McKinsey, Bain Capital and Silicon Valley it was such a relief that there was so much common sense and a starting point that acknowledged “no customers = no business”.
Viagogo is an on-line ticket exchange business and charges 25% for its service. It holds no inventory of any kind and gets the cash upfront from the transactions. In other words the business makes a good margin and generates cash in providing affordable ways for people to exchange tickets.
So what is the marketing story.
1. Eric has a great personal background in terms of the education he has received. He also gained experience of this kind of business as an employee of Stubhub in USA.
2. He assembled a fabulous board of advisors. Not only is this a source of advice and route to money, but it provides excellent “brand association” by demonstrating the quality of the company he keeps. This helps to open doors, creates an illusion of size and provides huge levels of credibility.
3. Identifying the new trends. More and more people go online to buy tickets rather than queue in shops and at the venue itself. So the credibility of being able to exchange tickets online is established by the new market trends and behaviors.
4. There are an increasing number of other online exchange sites – such as eBay, so the format is easier to explain to consumers.
5. In addition to getting alongside well respected Board members, Eric did early deals with Soccer Clubs like Manchester United and Chelsea to be recognized as an efficient and “official” place for fans to exchange tickets, basically thereby undermining the touts who hang around outside stadia.
6. Eric was clear that his business solves a real problem for people who want to buy tickets. They want secure, reliable service where they know they can sell unwanted tickets and on the other side people want to be sure they are buying the genuine article and not being sold a counterfeit.
7. Below this level of strategic thinking about marketing Viagogo has all the internal disciplines and tactical marketing tools it uses to generate awareness about itself. This includes getting feedback from customers and making sure you stay close to their needs, adjust and adapt your services and products as you grow.
So the big question is why and how an American came to relocate to the UK to start and grow this business? Eric loves sport, learnt about the way this business operates and spotted the gap in Europe. He relocated to London and the rest is becoming history! He has chosen to be a Global entrepreneur and is chasing global dreams.