My political career ended today at around 10am. My career in politics lasted around two weeks and it was great fun and I met some completely new people whom I was deeply impressed by.

Regular readers of my Blog will know that although I was never a big fan of Gordon Brown, I have been less than impressed by the actions of the new coalition government. They are shrinking the size of the state for ideological reasons; and I do not philosophically have a problem with that. But they are doing so at exactly the wrong time. I believe the UK will enter another recession because of the actions of the government.

When people say that this is the best thing for the UK in the long run, I remember what Keynes said “In the Long run we are all dead”. Someone losing their job is a massive tragedy for them and their family; they will not be comforted by the idea that their lost job is in the best interests of the UK economy.

So rather than complain about what is happening I decided to contact one of the contenders for the leadership of the Opposition Labour Party; Ed Balls. Two weeks I got involved in his campaign. It has been a strange experience but an inspiring one. My advice to everyone would be to get involved in a political campaign (whichever colour or views you subscribe to). You will meet some great determined and talented people and you should get inspired.

I met Ed Balls last night for the first time although I have been working on his campaign for two weeks. I really enjoyed meeting him and in a classic case of being in the right place at the right time, I was asked if I would introduce him and chair a major speech he was delivering today in the City of London. It was strangely nerve wracking!

Get me in front of hundreds of people to talk about business strategy or investing as a business angel and I will not have a problem. I realise I know enough to not embarrass myself; but talking to a room full of journalists and TV crews (live coverage on BBC news!) about something I know little about and you can imagine my fear. So at the end of talk, I decided any involvement I have in politics will be strictly behind the scenes! Hence my political career is over!

I do have to say though that I really enjoyed the talk that Ed gave and I felt inspired. He has bravely broken away from the consensus that we need drastic cuts to public expenditure. www.labourlist.org/the-growth-deniers—ed-balls-full-speech I also found him to be very keen to listen and learn what I thought were the key ways to support start ups and entrepreneurs. I wish him well and I will continue to support him.

As for advice from this blog; stick to what you know and are good at!

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Every now and then I get someone posting a comment on this blog that does get me thinking about an issue. One such comment came last week from an Entrepreneur who questioned what you could learn from Angels.

The sad truth is that yes, most ‘training’ consists of how to pitch. And the point the commentator makes is a valid one – how valuable is this training? After all, if a business is fundamentally flawed – the best presentation will not save it!

I hope the training most would be pitchers get is better and more comprehensive than this (please do let me hear your comments). So what value do I think I can bring to Entrepreneurs looking for Angel investment?

Most Angels have some business experience. They may not have sector specific experience but with all businesses the objective should be the same; to make money. And angels normally want to learn exactly how the business will make a profit – and how they will get their money out. But even then it can be a bit more complicated than that. I think that if Google pitched to me I would have said no. They solved a real problem at the start of the internet – how do you find things on the world wide web? But initially, they did not have a revenue model. They are now one of the largest companies on the planet.

And in the same way, many angels would not have understood the Skype business model (and wow to those that did!) Most angels will want to invest in “this is how we make money” rather than “if we build this, I am sure it will have value”.

For many businesses looking to raise money, I have found that the best training they can get is in the area of sales. Specifically, why would someone want to buy their offering and how would that place a value on it? Once you have convinced Angels that x, y and z want to buy your solution, you then need to have a plan of why you can supply this at a profit – it really is as simple as that. It is amazing though how many pitchers don’t get these truths.

If, as has happened, I have to ask you at the end of your presentation “why would someone want to buy your product” or “how do you make money”, you have probably blown it.

So here is my guide for what you should focus on

1. What problem do you solve? (Evidence of the value of the problem please)

2. How do you solve it? (Does it work?)

3. Who are your clients and how much will they pay for the solution?

4. Can you make a profit from engaging in this?

5. How can you really grow the business so that in 5 years (used to be 3 years – but time for Angels to get real!) my investment is worth 10x what it is today?

6. Who are the team? And why should I believe that they can deliver on the above?

7. Tell me all the things that can go wrong with the plan – and what contingencies do you have in place to cope with these?

That’s about it – I hope this is useful. Of course, a lot will go into each point – and perhaps I should write a blog about each point in greater detail?

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I was recently coaching a business in Canada and advising the CEO about building up a team. He was on a recruitment drive aimed at building up a team of all stars. My strong advice to him was to not pursue that policy but to rather focus on building a team with one or two functional stars and then have a team around that.

My thinking went along the lines that too many stars across too many disciplines bring their egos with them. They also will feel that because they are ‘stars’ that the company should focus on the expertise that they bring to the table. How do you then resolve problems between the sales superstar and the marketing superstar or the finance superstar? Recruiting people is hard, but retaining talent is even harder!

On the basis of this thinking, I believed that Spain would not do well in the World Cup. They were a team with too many stars. How could they park their egos and work well as a unit? Especially as World Cups bring together players who may not be used to working with each other. When they started the campaign with a loss to Switzerland my views seemed to be confirmed. And the failure of England with its ‘Golden Generation’ and the success of Germany with relative unknowns again seemed to vindicate my views.

Last night however, the Spanish proved me utterly wrong!

But there are some strong lessons that Entrepreneurs can learn from the experience of the Spanish team which does not entirely repudiate my belief about the danger of recruiting stars.

Firstly, most of the players came from one team; Barcelona. They were therefore used to working as a team and as a unit with pre-defined roles and responsibilities. Secondly, the captain of the team was the Goalkeeper; by definition he had to trust the team to motivate themselves to perform on the pitch. He needed to provide little leadership. Finally, the defeat to minnows in the first game and the elimination of both France and Italy at the first stage may have proved a great lesson to the team. They were not invincible and they had to park their egos at home.

The team on this occasion proved to be much bigger than any individual. The key lesson for someone looking to build a team is to ensure that they understand the essence of teamwork; the importance of inter-dependence and shared goals. And they must be capable of putting their own interest aside and work for the greater good. And of course, the hardest lesson to learn is that if you are a ‘superstar’ CEO, you are unlikely to get the best out of your team.

Very few great managers were great footballers (the current Barcelona manager is a notable exception). Ironically, I suspect it is easier to motivate and manage people when you have genuine respect for their talent because you realize you cannot do certain things yourself. Superstar CEO’s tend to think they can do everything better themselves; very de-motivating!

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“You guys have been hurt,” the entrepreneur was telling me. “I get the sense most angels have a $2-3 million dollar net worth and this downturn in the market has hurt you.”These were astute insights from a frustrated entrepreneur who invested a lot of time pursuing angel investors. He was smart, articulate, funny and dedicated; he just had lousy timing. No one was writing checks as he came to the front of the line in late 2008.

We’ve had quite a scare in the US as Senator Dodd drafted a revision to the SEC’s standard for an accredited investor. A revision made sense on one level, it hadn’t been updated in decades, but concerns grew quickly that any change, even applying an inflation rate to the threshold, would wipe out as many as half the angel investors in the country. We’ve dodged that bullet for now, but it sizes the wallets of business angels: many of us are investing with finite resources.

Angels make up a precarious bridge in the early-stage investing ecosystem. Venture capital has moved upstream in many markets, leaving a gap in seed stage funding. Angels fit nicely in this range; many of us have the time to contribute more than just money to a worthy startup. But angels who have been at it for awhile are feeling quite pinched due to a liquidity crunch. Lisa Lambert, VP Intel Capital, recently quoted statistics on Stanford’s Entrepreneurship Corner, citing the time to liquidity has grown from 2.6 years to as long as 8.4 years today; that’s something Intel can withstand, but early-retired business angels are feeling “tired and tapped out” waiting to get to an exit on their investments.

For me, besides impacting my personal net worth, the turbulence in the market has pushed my exit opportunities further into the future. Yes, this is supposed to be patient capital, but more time to exit also carries great risk. For example, one of my most promising investments is finding itself impacted by the Gulf oil spill. Talk about a black swan! No one ever imagined such an outcome.

I predicted that many of my angel peers would be spending more time supplementing their incomes resulting in less time for looking at deals. So far this year in Los Angeles, angel investment in early-stage deals is at record low levels. But before I get totally depressed, don’t let me forget to mention that we have 2 IPOs planned for later this year; one is expected to be spectacular, the other less so. News of these exits will revitalize the early-stage market and attract more business angels to join groups. But two deals won’t make many of us whole, just a relative few. And for those angels that do reap large rewards, I predict that money is coming off the table, as they say in Las Vegas. They’ll have waited over 9 years for this return, and many weren’t spring chickens when they made the investment. Some will, but I imagine many will pocket the proceeds and concentrate on their retirements; few will contemplate another 9 year cycle.

Is it the lure of making big returns, or the fact that so many of us are unemployable after our own entrepreneurial successes? Whatever the case, we’re attracting new members at a surprising rate, so much so I’m conducting a half-day training class later on this month; I’ve titled it “Angel Investing 101”. My challenge? How do I balance a candid assessment of the current trends, the ever extending liquidity timeline, while educating and inspiring them? The need for seed and early-stage capital is as great as ever, but the sustainability of the business angels providing that capital is in jeopardy.

Frank Peters
Newport Beach, California
July 5, 2010

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At University I read Economics and the courses that fascinated me were around managerial economics. One of the most exciting courses for me was looking at the relative industrial decline of Britain since the start of the twentieth century. The usual suspects include Trade Unions.

There was though a very interesting theory put forward though that the problem with trade unions in the UK is that they have always been too weak! The argument goes that in Germany where trade unions have management representation and see themselves on the board of companies, union leaders are able to help companies, because they have access to all the information and realise what must be done. It is also fair to say that along with most places outside of UK and North America, the German culture does not have the same obsession with maximising shareholder value.

The thought is that if companies find it hard to adopt hire and fire policies, they will have to take longer in the recruitment process, they will have greater incentive to train and to be very productive. It does seem that ‘left-leaning’ economies like the Nordic countries have much higher productivity than free-market economies.
What interests me though is the role that Trade Unions have played in recent innovations. Fax machines only really took off during a large scale postal strike in the UK in the mid 1980s. (By the way I would really like to meet the sales person who sold the first fax machine – that is a sales person!)
More recently in the US, the screenwriters in Hollywood went on strike for a long period of time. Of course television needs to carry on and the studios response set in motion an innovation we are all tragically living with now; reality TV. It is cheap to produce and needs no writers. Of course we had reality TV before the strike – but it was the strike that really got it to take off.
So lets see what innovations come out of the BA strike!

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As you can probably gather from the title of this blog, I am in Halifax Canada at the moment. I am at my best here (and my next Blog – Momentum looks at what drives this). About six weeks ago, I ran the second “From Mind to Market” course for around 12 businesses. An innovation on this course was that after the course, each business would get one hour of coaching. This week I visited the companies to do this. One of the CEO’s said that he thought I had the best job in the world – I agree!

I thought it might be interesting to share some of the key learnings from the coaching for other entrepreneurs. The interesting thing was that each business had very different issues and different personalities – but were all looking for high growth.

1. If you are in a declining business or a sector where margins are being eroded, look at a niche within that sector that is growing. (Sounds nonsense but just try it – what is growing within your industry?)

2. Always ensure you have the skills to deliver in your chosen space. Profitable business is always about repeat business (you rarely make money in a product or service offering on the first sale – doing a great job is necessary)

3. Stick to Marketing/ Selling your solution – don’t try and sell your industry. (Let the association do that and support them)

4. Don’t do market research which is costly unless there is a significant capital outlay required before you can commence business. It does not make sense to spend time and money on this – if you can “just do it”

5. If you are a start up – don’t engage in channel or distribution partner strategies. The effort and skills required to motivate partners is not feasible for a start up

6. Price your solutions to make a profit! (obvious but how many times do we have pricing which reflects industry ‘norms’ rather than this truth?)

7. Control your costs – profit is sales less costs.

8. When you are growing fast – remember it is really draining on cash. Growth brings a difficult cash flow situation. Most businesses that go bust do so when they are growing! FACT

9. Borrow ideas unashamedly

10. Look at what employment solutions are available through the public sector (in every country there is bound to something to that encourages employers to employ people) Use these schemes. Especially if you are looking to engage a new skill set – or you are a service business heavily reliant on labour

11. Really understand what your customers are buying – not just what you are selling

There were some more key learnings as well – but they were a bit too specific to go into here.

I do hope you find this useful.

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The economic environment we are in is a big determinant on entrepreneurial activity. I am a believer that start ups which start in a recession can often do better than companies starting up in a boom. I do think though that the UK economy is going to be heading into another recession/ slump very soon.

It is important that entrepreneurs recognise the circumstances that they will be trading in. Starting in a recession is very different from trading into a recession.

My views on why we will go into another recession are just mine – and better placed people than me, will no doubt disagree. Firstly, the recovery the UK is going through at the moment is very fragile and although inflation is higher than the target range, it is predicted to fall sharply.

Public expenditure is coming down sharply in the UK. Some cuts (£6bn) have already been announced and another set of cuts will be announced on the 22nd of June. This will of course negatively affect total demand in the economy. Taxes are also set to rise, and if VAT goes up as widely predicted to 20%, it will have the effect of adding 1% to the inflation rate.

Sterling being very low at the moment against the US$ and Euro also adds to pressure on inflation (by increasing the price of imports). The ‘problem’ with this type of inflationary pressure (as well as with VAT increases) is that they are shocks to the inflation rate and don’t represent excessive demand. Nonetheless, the Bank of England which is charged with maintaining a low inflation rate may need to raise interest rates.

I hope they do not raise rates as I think demand is going to be considerably lower in the economy without a rise in rates. An increase in the interest rate would precipitate a recession.

The point of this blog is that if you are looking at starting up – now is a time to be a bit more cautious than normal. You may be better off starting in a year or two. Equally, if you are trading already – just be careful, we are most certainly in for a bumpy ride

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I love being busy. I find I get a lot more done when I don’t have time to stop and think about what needs to be done (which means my effectiveness is not perhaps what it should be – but that’s another blog). I find that when I am not busy – procrastination sets in.

There are many great jokes about procrastination. “I always find its best to procrastinate when you have something to do” would be my favourite – or the T-Shirt which said “ Top 10 reasons to procrastinate. 1….”

I have always needed to come up with clever ways to avoid doing nothing. The impression people always have of entrepreneurs is that they are always busy and they manage their time really well; my experience (now working with just over 100 start ups!) is that most entrepreneurs are really bad with their time management and do indeed procrastinate,

The really bad habit for me was working from home. I could not do it. I would find it too tempting to watch the Jeremy Kyle (a poor version of the Jerry Springer show). It really is an awful program – and he is the personification of a parasite, but I had to watch it. And then there are those wonderful crime programs on the Hallmark Channel like Monk, Law & Order (both Criminal Intent and SVU: Special Victims Unit). I could so easily spend all day watching TV – and not feel bad! Here I go again procrastinating…

Anyway, at the start of this year I got myself an office and started working with someone. This has seen an amazing increase in my productivity – I have to be in the office by 9am – the hard thing for me is starting work. Once I start, I really enjoy the work and can easily stay till about 7:30 in the evening. I also find that working in an office means that when I am home, I can switch off (although iPhones don’t help!)

Other things that seem to work for me are making lists of what I need to do. It is not that I have a problem remembering what to do, I just really enjoy ticking off things from a list once I have done them. (If I could have my way, I would even list things like brushing teeth, having lunch etc – just so that I get more easy ticks). And hence I still need old fashioned paper and pen. Point is whatever works for you is good.

Finally, my new business partner in Canada (great to have you on board April) told me about this concept she sometimes uses called The Life Manager. If you employed a Life Manager and you were reviewing how well they were doing managing your life/ your week/ your day, what marks would you give them?

Well – you are that Life manager and if you are not giving yourself top marks – why would you continue to employ them? This concept is mainly used with weight management – but I do feel that it can so easily be extended to your professional life. Like I say – whatever works for you is good. Now- can someone tell me how to get myself motivated to go to the gym?

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I am spending about one week a month working in Canada. Whilst there, I work with many start ups and I have started angel investing in Canada. There are no notable differences between the issues and the challenges that start ups face no matter where they are located. Sadly, I have though noticed I am giving very different advice in the UK to start ups wanting to obtain support or contracts from government.

In the UK my advice for a start up is to stay well away from Government (any agency of government). In Canada, I would advocate the company to get involved with a government agency as soon as possible. Why the difference?

For cultural reasons, Canadian government staff tend to be of a much higher calibre than the people I have come across with government agencies in London.

The sheer hard work required to win government work in the UK even for relatively small value contracts means that I really think it is a flawed strategy for a start up to try and seek government contracts.

In the UK, I recently looked at pitching for some work which I felt I would be well placed to do but once I looked at the requirements involved in pitching, I decided it simply was not worth the effort to go for it. The risk/reward ratio was skewed against me.

For a start, I would have to partner with another organisation that had at least a £3m turnover. The paperwork required would mean that at least two members of the team would be fully occupied for at least two weeks. And as a business that has not won this type of work before, I felt that the effort was not worth it. Compare this to my Canadian experience.

I came up with an idea to help Canadian companies and after writing a four page proposal for a local government agency, it was accepted and I have started working on this project.

The people I have worked with in Canada seem more commercially aware – they ‘get it’. So, I do find it ironic that in the current climate when the British Government is trying so hard to try and support small businesses and start ups, that they do not start closer to home! They should temporarily lower the high barriers that prevent companies from getting government work. And they should actively discriminate against the same old companies that seem to win most of the big pieces of government work.

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I was at a very nice lunch last week hosted by my lawyers (and who said there was no such thing as a free lunch?). The lunch was simply wonderful and during the conversation I naturally explained what I was doing in Canada, and that I now spend at least one week a month there. This then led one of the people at the lunch to say I was a great example of an entrepreneur.

Of course I was flattered, but in all honesty I do not consider myself an entrepreneur. I would describe myself as someone who just stumbles from one thing to another and hopes that one of the things I stumble across works. As a very successful angel investor described his investment approach “spray and pray”.

The problem with the above is that it does not fit into the description that most people have of entrepreneurs or successful investors. I have often sensed the disappointment in business students when I am doing my talk at St Mary’s University when I explain that the route to where I am now was littered with accidents and very lucky coincidences. What a lot of us want to hear is that there was a plan and some positive thinking affirmations.

I personally have a real thing about people calling themselves an entrepreneur. I think it is for someone else to call you that. Most people I know who call themselves entrepreneurs are rather like waiters in Hollywood who call themselves actors. It means nothing to me.

If you had an enterprise which had launched or was running – you would talk about that. Calling yourself an entrepreneur implies you do not have one thing to talk about.

Judging upon whom I am talking to, I will describe myself either as a Salesman (my preferred description), Fund Manager, Angel investor, Blogger (is that a valid job?), Business consultant or trainer. The point is that I would never call myself an entrepreneur as it ends up meaning nothing other than tell the person I am describing myself to – that I have nothing substantive to point to. And trust me – I never want to invest in someone who describes themselves “as a bit of an entrepreneur”.

I was at another lunch recently where I asked someone what they did. The answer was “I run several businesses”. She did not know who I was at that point, but she had lost my interest straight away. I am involved in several businesses but I only run one – Help with Sales. I am sure some of you will disagree but I find it very difficult to imagine someone actually running more than one business.

Why do people do it? Just remember that great saying “money talks, bullshit walks – but wealth whispers”.

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