Amongst the positive feedback I get for this blog, I also get occasional criticisms (also welcome) that the blog should only be about business issues and when I talk about the US election or the world in general, that it somehow dilutes the impact of this blog. Whilst I will always listen respectfully to any criticism, I have to say I think this line of attack is wrong.

In the Vice Presidential debate between Joe Biden and Sarah Palin (and yes like most men over 30 I do fancy her – and yes I do feel very bad that I do – she is someone who does not believe that Dinosaurs roamed the earth) Senator Biden was talking about the last eight years and Governor Palin said “this is all about the past”. The response was one of the best lines I had heard in the campaign (and yet was not reported). His response was “The past is a prelude to now”

Business opportunities do not exist in a vacuum. They exist through change and making the most of the uncertainty that change can bring. As someone who likes to look at the bigger picture as an investor it is important that I try to make sense of the world around me and the uncertainty that exists. By trying to understand the background, hopefully I will be able to predict the scenarios that may exist in the future and plan accordingly.

In the early 1980s, Shell was one of the first corporations to engage at a strategic level with scenario planning. One of the plans was to see the impact of oil at $10 a barrel. At the time, this seemed to be far fetched. Nonetheless, the scenario was flushed out and plans were drawn up. When the price of oil did drop to $10, Shell was well placed to exploit this changed scenario. They were able to steal a huge march on their rivals. They had planned for this change of events and did not panic when these events came to pass.

As such I think passionately that if you want to be a seasoned angel investor or a serial entrepreneur, you need to understand more than your own narrow field (although you do need deep expertise in that area). I have both an interest in the wider world and a professional desire to better analyse and comment on the world around me. One of the highlights for me in 2008 was being asked to speak at a conference in Canada. To position myself to speak at more events, I do need to be able to articulate my own views of how I see the world.

Although the views may be my own, they will be hopefully formed by reading lots of different sources and basing the views on logic.

I am away in Egypt this week and hope you will indulge me by allowing me in future blogs to share my analysis of the world. Although I may be convinced I am right, if enough readers to tell me they are not interested – of course I will have to change my views!

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Man we were cool in the 80's !

I am off to Egypt for a week and I have promised myself no email or even phone access for that week. It remains to be seen how long I am able to survive. I have not been without the use of a phone for more than 24 hours in over ten years!

It is a funny thing, but I remember getting my first mobile phone (through my employer Duracell batteries). It was very strange technology and I couldn’t get over how cool I must have looked – talking into a phone whilst driving on the motorway with my jacket on a hanger and popping into Little Chef for tea (I didn’t know what a latte was at this stage. Yes my perception of what I thought was cool then is very different to what I think is cool now! At this point I should apologise to those thousands of salespeople who live this life – yes it is still cool (especially white socks with dark trousers).

Again, I remember when emails started. Again it felt very strange to use this new technology. I was at Fujifilm and I remember how the sales team had a secretary who used to do the typing for us. The process was as follows

1. We used to first write something up on paper and then submit it to her
2. She would type it in draft and then let us have it back to check.
3. There would always be error so we would then make the corrections and then submit it back
4. We would then get a letter printed out on proper paper which we would sign and send

This was a little over ten years ago. It is amazing to think that a business which was producing cutting edge digital technology (1Mega Pixel cameras!) were not using laptops.

Again I remember when we did get a laptop, we only used it for sales presentations – and the sales team had to share one between four people!

My point is that the way we do things can rapidly become obsolete. And it is very difficult to know what technology will work. I remember getting my first text message (Thank you Mark Bryant) and thinking how stupid that was. I remember saying “that will never take off!”

If you are working on a new technology, my advice would be to learn from 3M Post it Notes. This is a classic case study of how a failure (glue which was too weak to stick) became a massive new market which did not exist before. The key thing that happened here was that what led to the success of the product was the company giving out lots and lots of these products as free samples. People were free to invent the way they wanted to use this product – and I think the result is that now you would be hard pressed to find any office which does not have Post it notes.

If you have come up with new a new product or solution, my advice would be to ensure that you have allowed enough budget to just give out a lot of your new solution. And let people to play with it. The most amazing thing about new technology is that we all different reasons for using it. The classic case is the iPod and the iPhone. The way the iPod was sold to me is very different from the way I perceive the benefits. I travel a lot and I like the idea that I can take my entire music library with me wherever I am.

When I run my sales training courses, one of the key things I try to teach is for sales people to appreciate the difference between knowing what you are selling and what your buyer is buying. This is very important when selling a new solution. If you let the buyer ‘get it’, you are more likely to get a sale!

Happy playing with technology

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There has been much talk about the nightmare of negative equity returning to haunt the UK property market in the press over the last few months in the press. What does this all mean and what is the impact it is likely to have on entrepreneurs looking to raise money?

There was an interesting statistic published last week. 39% of start ups require just £10,000 or less to take them through to profitability. I appreciate that business angel blog is aimed at businesses looking to raise slightly more than this amount but it is an interesting statistic.

An overwhelming number of businesses get funded from family and friends. The ability of most people to help start ups is linked to the value of their property and hence negative equity will have a strong and negative effect on the number of start ups that are able to access this vital line of funding.

Most people when buying a property will borrow money to make that purchase. Let’s say someone buys a property for £150,000 (more or less the average price of a home in England). They borrow 85% of the value and make a 15% deposit. I bought my first place with a 95% mortgage! This means that the equity they have in the property is £22,500. If the price rises by 10% to £165,000, and the debt remains the same so the increase feeds straight through into the equity element. The equity is now worth £37,500 – this is an increase of almost 90% (this is known as the leverage effect).

As the homeowner feels wealthier – they may be inclined to re-mortgage and use that extra wealth to fund a start up. (You should never as a rule use borrowed money to invest in a start up – but people do).

All very well so far. But what if the property price instead of going up 10%, falls in value by 20% - as it has in the last year in England? Suddenly your property is only worth £120,000. Your debt is £127,500 and hence you have £7,500 of negative equity. This leads to financial insecurity and hence an inability to help friends and family who need some money to start a business.

The irony is that when in a recession, more people lose their jobs and hence would like to give entrepreneurship a go – but find the lack of funds available a real barrier to start

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I wrote a blog sometime ago about the markets and the effect it is having on business activity at the moment. When I was writing, equity markets were down about 20%. They are now down about 40% from their peak. What do I think now?

The first thing to say is that we are not dealing with rational behaviour. The markets are behaving in a completely emotional manner. There is nothing wrong with that. Angel investing is an emotional decision to a large degree and a rational analysis would lead you to the conclusion to not engage in this very risky activity.

I would have said that the FTSE 100 below 5,000 represents great value. It got to 3,755 and is now around the 4,500 mark. Does it represent a bargain now? I would have to give politicians answer and say it depends on your time horizon and your expectations, but yes it does look like good value.

Therefore, entrepreneurs looking to raise money at the moment will have to look at the reality of the valuations they seek given where the market is at the moment. They need to be around 35% to 40% lower than this time last year. This is not just to bring you in line with other asset classes; it is also to reflect that your revenue lines will be a lot lower than you could have projected a year ago.

We are in a recession; it is real. The problem is that most people under the age of 40 in the US or UK have never experienced a recession and so are ill equipped to deal with it. Before I get too smug, this is ‘my’ first recession. During the last one, I was safely insulated at University. I only read about it.

But the psychology of a recession is already shaping up. And it feeds off itself. People stop spending and fear being laid off. This then leads to lower spending and hence job losses and the economy is trapped in a vicious cycle. It is for this reason that governments need to boost the economy at this time by spending on new projects and creating new jobs. The problem facing both the US and the UK is that we have had our national finances very poorly managed for the last ten years and government debt levels mean there is little room for government help.

Since I wrote this blog – interest rates are down to 3% - I wasn’t expecting them to get to that level so soon. I now expect interest rates to be between 2.5% and 3% before Christmas and about 2% by June next year. Happy days!

Again, the problem is that banks are not lending so even if rates got to 2%; it is no good to anyone if they will not borrow. I have many examples of banks reneging on lending commitments. This is going to choke off the only route for growth left. I have defended the banks in the past, but feel it very hard to do so at the moment.

In conclusion, I am pessimistic about 2009. I do think that the foundations will be placed though for a very strong recovery in 2010 and we in London at least will get a big boost from the Olympics.

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This has been a very bad time to be a racist. First, Lewis Hamilton spoils that bastion of white wealth called Formula One by winning it (and becoming the youngest ever world champion) and then Barak Hussein Obama becomes elected the most powerful man on the globe.

I have always been staunchly pro America. I hate the lazy anti American attitude that Europeans seem to have at times. The reality is that Europe could not even sort out the murderous ethnic cleansing going on in our backyard in Bosnia until Bill Clinton decided enough was enough after a bomb went off in a market in Sarajevo killing scores of civilians and ordered US planes to bomb Serbian positions.

Like most of the world, I am highly critical of George Bush’s misuse of US military strength. But if you look at the evidence, he has done more for the cause of Africa than the Clinton administration did. (Bono from U2 said this!). He was also the President that gave two black people of immense talent Secretary of State roles. (Colin Powell and Condoleeza Rice) But I guess it is easier to join the crowd and condemn him than to look at things objectively. Under the new President, I am sure that US military strength will be used alongside the renewed moral strength that the US has. Other than India, which other democracy in the world is led by a person from a minority community? (OK you might argue that President Sarkozy as the son of a Hungarian immigrant qualifies). The victory of Obama is massive. ‘Civilized’ Europe will have to devise a response to this. We can no longer beat the US up because of what happened in the South in the 1960s.

The question being asked here in the UK (and Europe) is where will our future black political leaders come from? I think one of the reasons why it is very hard for anyone outside of the mainstream to advance is that in the UK there is only one route for political advancement which is as a Member of Parliament. You then owe your allegiance totally to your party and the senior politicians who you hope will promote you to a prominent position. This has nothing to do with racism. Having lived here all my life, I can say that in my professional life, I have not experienced racism. It is again too easy and too lazy to just blame things on racism.

In the US, you can become high profile enough to run for President by becoming a Mayor (Guiliani), a Governor, (Clinton & George Bush), a Congressman or a Senator (Obama). There is also the ability to occupy a senior government role without being an elected official (Colin Powell). In the UK, to be in the cabinet, you have to be in Parliament (either as a Lord or as a MP).

For me, this explains why politicians on the whole in the UK are bland and their failure to inspire. They have to be part of the ‘system’. Entrepreneurship is far more attractive. Politics loss is Businesses gain – lets be having you!

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Beware the crowd

You may recall from my blog last week – more tales from New York that one of the things I really liked about the network I met was that they insist their members make a minimum amount of investments each year. I have been on both sides of the table when it comes to raising money. There is nothing more disappointing than putting in a lot of work into a pitch – to discover that the people you are pitching to –don’t actually invest. I promised to expand more thoughts – and here they are.

One of my biggest sources of frustrations about this ‘business’ is that you can spend a lot of time on the wrong group. You meet a lot of people who are complete time wasters. Before you, as an entrepreneur put your heart and soul into working on a pitch, please do run your own checks on the network you are pitching to. How many deals have they completed? What does that represent as a percentage? How many members actually invest (the 80-20 rule may kick in). You are totally entitled to ask these questions.

I remember a great episode from my days involved in University Politics. I ran the Student finances for a year as a full time elected official. Elections were held each year to choose delegates to attend the NUS conference in Blackpool. At the hustings, around 50 people turned up. A candidate, Enda McCarthy, asked everyone to stand up. He then went through this brilliant pitch which even after almost 20 years I am in awe of…

His pitch was

1. If you are a candidate could you please sit down
2. If you have nominated a candidate could you please sit down
3. If you have already made your mind up who you are voting for, please sit down
4. My name is Enda McCarthy, I would like to be your rep at the conference – please vote for me.

He made the fourth statement to the 12 people that were still standing.

I would admire anyone who had the bravery (or stupidity) to the same at a pitch to a network. (If it goes horribly wrong – please do not sue me).

The point I am making is a serious one though. Whenever you do a pitch to a number of people remember you are probably only talking to 20% of the people there. If you can find a way of isolating them and delivering a highly relevant message your chances of success may be a lot higher.

Best of luck

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Canada Rock..ies

Hello from London and apologies for the absence of posts for the last couple of days on business angel blog. I was at a conference in Halifax, Nova Scotia in Canada. It was an annual get together of the angel networks in Canada and many from the USA.

It was the first time I was at a formal gathering of angels and it reaffirmed my view that angels are a really nice bunch of people. We are driven by a desire to help entrepreneurs and generate wealth. The strange thing about conferences is that you do end up getting very close to people over a very short period of time.

I laid the foundations for what I hope are some long term great relationships with many people. The thing I enjoyed most about going to Prague for example was the opportunity to meet some Angels in the UK. If any of you are invited to go to a conference – my advice is to go as long as you realize the real thing you can do is forge relationships with people.

I learnt a great deal about angel networks and how angels tend to invest. As I mentioned in some other blogs as well is that angel networks tend to promote best practice and they want to contribute to the business venture being successful. Many entrepreneurs are understandably nervous about working with investors. I have seen too many good entrepreneurs being taken for a ride by so called angels. Worst of all are the advisers that get involved from time to time. Perhaps that should be the subject of another blog!

Most angels, who belong to a network, tend to be entrepreneurs who want to ‘recycle’ their money and their experience into new businesses. My advice to entrepreneurs is to feel confident enough to vet investors just as much as they want to vet you.

I will be writing a lot more about the lessons I picked up which I would like to pass on from my time in Canada. Please do have a look at their www.angelinvestor.ca/ - and in the future they may post the presentation I gave.

The presentation I gave was about my experience as an angel investor and the lessons I had learnt from my investments. I also learnt from the other speakers at the conference and look forward to sharing those lessons.

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I hope you can sense from the blogs of the last few days, how much I have been enjoying my time in New York. I hope you do not mind that business angel blog seems like a diary at the moment – but I trust you do find some of the lessons and the observations useful.

Yesterday, I met with Paul Sciabica, Executive Director of New York Business Angels. It was a very useful meeting and gave me a sense of how similar angels think and work out deals. The process was explained to me in terms of submission to actually getting a deal done.

They have a three step process which you can see on their website www.newyorkangels.com and the model does seem very straightforward. I picked up two interesting points though. If one of the members of the Angel network in New York has already agreed to invest (or has invested) you get fast-tracked into the second stage of the process (overcoming the first stage is the hardest). This does make a lot of sense.

I trust certain angels – even to the point where in the past I have done deals, simply because they were involved. I also realize that some angels have done deals with my companies because they trust me. As such it makes sense for you to really try and get someone from an Angel network on board with what you are trying to do and get a commitment from them to invest. Ethically, you can not offer them any inducement to do this. Angels need to know that they are getting the same deal as everyone else. I will not negotiate better terms for me than people I bring into a deal at the same time. And I certainly expect the same in return.

The second thing I really admired about the New York network was that they insist their members make a minimum amount of investments each year. I like that a lot. I have been on both sides of the table when it comes to raising money. There is nothing more disappointing than putting in a lot of work into a pitch – to discover that the people you are pitching to –don’t actually invest. This has inspired me to write another blog!

ANother food based business that I had to visit

After my meeting with Paul, he also suggested that I check out a new burger joint called Shake Shack which is on Madison Avenue. I cannot believe it but I queued for 40 minutes at 3.30 in the afternoon for a burger. I have a confession to make. I don’t get the whole gourmet burger thing. I have always held the narrow view that a burger is a burger. How wrong I have been.

This burger was simply fab! It was just really good. Simply because the meat was fantastic – there was no rocket science to it. I was told that people queue for an hour at lunchtime just to have the burgers here. Readers – if you are ever in New York – please visit this place. It on 23rd St East, Madison Avenue. And I promise you I am not a shareholder!

Finally, I went to Hoboken, and saw some canvassers for Obama. I ended up volunteering, making a few friends and selling some wrist bands for Obama. It was great fun. Ignoring the politics, I have just found it very easy to get involved in things in New York. It is easy to make friends here. I got involved totally by accident – but simply loved it. (Hence the photo)

I am writing this blog from Newark airport as I leave New York for Canada and for the National Angel Conference. I hope to report more from there. I am very sad to be leaving New York. I have really enjoyed my time here. I will probably have to make an investment here – to give me an excuse to keep coming back!

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Calorie counting in NYC

So after my political ‘column’ about New York yesterday, I hope you find my observations today more useful. I hope that I spark off some ideas for you to think about in terms of your own businesses.

As I have mentioned in the past, New York seems to be ahead of the curve when it comes to food. If you are contemplating starting a chain of food stores, it is always worth a visit to New York to see the latest trends.

By the way, you may think that now is the worst time to start a food business. I would just say that Pret started at the height of the last property recession. It took off precisely because there was a glut of cheap properties available at the time and it was being offered very good deals on properties. So who knows…..

My first comment is around a change that has taken place because of the law. I noticed that a Starbucks (yes I know it shows a lack of imagination to visit Starbucks in the USA!) in NYC had a full list of the calories with every item for sale. I learnt that a law has passed in NY that requires the calories to be displayed on every item for sale.

This is not a nationwide measure – and in Starbucks New Jersey – they did not display the calories. But I think the rest of the nation will follow in the footsteps. Early indications suggest that sales of low calorie items are significantly up. I do not know how calories are measured, but there must be a new and fast growing market in being a ‘calorie auditor and consultant’. Again, by the way, do you know what a calorie is? I was fascinated by the answer; it is defined as the energy required to heat one gram of water by one degree C. There must be a business here?

I then went to ice cream store called – Cold Stone. It was a fantastic experience. Basically, they do a tailor made ice cream service. You start off by choosing a base ice cream such as Vanilla, Banana etc and then you choose lots of different toppings such as chocolate chips, walnuts, jelly babies, M&Ms, raspberries etc. What they then do is ‘bash’ the toppings together and blend it into the ice cream and the result is simply fabulous. I do think that the idea of the ‘Subway’ process is set to grow. You choose a base (say porridge or a smoothie base etc) and then you choose lots of different toppings to end up with a unique product but from a ‘factory’ process.

I was impressed with the product and the process. Time after time feedback shows that what consumers are looking for from retailers is ‘theatre’. Amano (give me a break – it has been at least three weeks since I have mentioned them!) has a stone oven which provides theatre. Process is often just as important as product. I think this is what works so well for Wagamama for instance – seeing the chefs at work is brilliant.

If you like these ideas – and are going to pursue them – feel free to give me some shares in your business. That is something that New York has also inspired me to do – not to be shy in asking for what you want!

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Greetings from New York

I arrived in New York last night. I so love this place - it really is so full of energy and colour. I met some people for Dinner last night and was walking around Broadway at around 10pm. The thing that really struck me was how many languages I heard in just 10 minutes.

Being the child of immigrants to the United Kingdom, and believing in free markets, I have always held the view that the freedom of movement of labour brings large economic gains.

The US unlike any other country has managed to become a terrific melting pot and an example to many about how integration can work. Within three weeks of this Blog, the incumbent of the White House could be black. The child of a Kenyan farmer (he never knew his father - like Bill Clinton) whose family survived on food stamps and experienced real poverty (again like Bill Clinton).

This is where the US is so different from the UK and I suspect most of Europe. 1992 was the first election in the UK where none of the leaders of the political parties went to Oxford or Cambridge University - almost half of all MP’s went to the same elite private school (In the UK we have a perverse way of describing elite private schools as public schools).

Where is the next European Obama going to come from? Forget Politics, the US has a great track record of giving access to minorities to ‘elitist’ sports. Tiger Woods and the Williams sisters stand out as shining examples.

My point is that the US is living proof that talent exists everywhere and competition is healthy. I think there is a lot wrong with the US - the notable problems being the gun culture (although per capita the Swiss have more guns than the US) and the complex health care situation that leaves tens of millions of working Americans with no health cover.

However, I do believe that competition is healthy providing there is a minimum safety net for individuals. Many Entrepreneurs are that because they are unemployable! (they would admit that themselves). As a society, we must do what we can to ensure people have opportunities. This is the one thing that Americans seem to excel at.

I am in Canada later this week to talk about the EIS scheme and to try and encourage the government there to adopt a similar scheme. I do think it is economically the right thing to do to encourage Angel investing. I also believe it is morally the right thing.

We have a lot to teach the US but we have a lot to learn from the US as well.

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