Business Angel Blog

As a business angel I get to work with numerous small startups. The one thing that links all the success is outstanding people.

Two companies that I am associated with, have two positions that require outstanding individuals. Please send an email to pvalia@helpwithsales.com if you are or know anyone that fits the bill!

Operations Director / COO

A young but dynamic company that I have worked with, are looking for an operations person to manage the delivery of their products and services. The company have created an entire sector and currently are the only company working within it. The company has grown quickly in under 2 years and revenues look set to double again this year. Aware of the likely appearance of competitors, they have a fantastic plan to scale rapidly.

The delivery of the service is both complex and technical. The right candidate needs to be able to manage on-site installation crews, deal with legislation issues and manage clients whilst coordinating both employees and contractors. You will be working at Board level but as with any start-up you will be expected to get your hands dirty – a lot! (Good package and options)

Sales Executive

Another young start-up that has picked up some traction over the past 12 months. Recently they have picked up some major clients and joined forces with a major international online advertising player.

This is a tech, online start-up that is working within an exploding sector.

They need a hungry sales executive ideally with experience selling online marketing services or securing advertising accounts. Excellent package for successful applicants

Please do get in touch!

Angel investing is like marriage; it is the celebration of hope over statistical reality. So the world is celebrating the marriage of Prince William to Kate Middleton tomorrow and on a personal note of course it is something worth celebrating. But I have to admit that I am a complete party pooper and as a proud Republican I find the national celebration of a royal wedding depressing.

Many people do not care about it and perhaps I am worrying about the wrong thing. I just find the idea that we in the Commonwealth are still subjects rather than citizens depressing. We are supposed to show respect to members of this family purely on the basis of birth right rather than on merit.

My background is as a Sikh. A central principle of Sikhism is the utter rejection of the very cruel and barbaric caste system. The idea that your life ambitions and aspirations should be determined by accident of birth is a shocking and alien concept. People across the world are at this moment in time giving up their lives so that they can be governed by people that they elect rather than by the children of dictators.

I love the opportunities that this country has given me. I came from a very modest working class background and have not had that hold me back in any way whatsoever. However, there is the backdrop of the Royal Family which lets me know that I could never aspire to be the head of state of the country that I was born in.

Lets compare that to the USA. And it interesting to look at the USA where Donald Trump is leading the charge into questioning Obama’s Americanism (by the way I do think Trump is the perfect candidate for President as he has more experience than most of being able to declare a business bankrupt and then start out again – where the only losers are the banks and shareholders). The truth is that a black kid from the UK could not become the head of state for this country. It is also still true that a Catholic can’t become part of the succession.

It is still problematic for a Catholic to be prime minister of the UK (Tony Blair converted once he had left office). As someone who loves the entrepreneur space, I think it is wholly incompatible to believe in social mobility and the role of the crown. The principle behind the royal family is exactly the same as the principle behind the caste system.

And I concede that the problem we have in this country is that the queen has done a magnificent job as head of state.(Her first prime minister was born in 1874 (Winston Churchill) and her latest was born in 1964). So this is not an anti-queen diatribe but it really is about the principle behind it all.

So do celebrate the wedding, but please do bear in mind you are celebrating birth right over merit.

Anyone who has been in business will learn that they will come across people who are either very greedy or completely lack integrity. The problem is that many of us have been taught that “all is fair in love, war and business”. This then creates an impression that “greed is good”. I would like to challenge this.

Wanting to make money is a noble desire. Wealth creation creates opportunities for society and improves the well being for an entire society. It is the only thing that can permanently lift people out of poverty and cycles of low expectations. But dumb people (and you know who you are!) confuse business acumen with something which is Greed.

Business acumen is about how you can generate value for your customers or shareholders, and capture some of that value for yourself and your backers. Greed is very much about what you alone can take out of a situation. A good acid test on whether you are acting with greed or with business is how you feel about describing your actions.

If you are embarrassed or want to blame someone else for what you did, it is greed. If you are able to stand up and tell people how you created value- it is more likely to be good business acumen on display.

I have always tried to behave with integrity in business, but that has not always been the case. When I was very young (pre-University) I did a couple of things which were acts of greed. As such, we should always make allowances for people who are young and in a hurry. But there must come a time in your life when you should know better.

I have had experiences with greedy people (more so recently than in the past bizarrely) but the great thing about greedy people is that they reveal their hand very early. Tell tale signs to look for are

1) If you are not clear about the motivations of your business partners – that is a big red flag. I tend to tell people within minutes what I want out of a situation.

2) They invoke religion as a character reference. One of my best friends and business colleagues is a very devout Christian, but he never uses that as a reason why I should trust him.(a real tell tale sign of a crook. They will say – as a devout (whatever religion I will not do this or that)

3) Strangely, they never want things to be crystal clear in terms of who does what for what. They may stick to broad things like 50-50!

4) They don’t like people they are doing business with.

5) They agree with everything being said (even when they are totally contradictory)

You have been warned!

I recently took part in a great business plan competition amongst MBA students from across North America (and some other places as well) at the Stu Clark Centre of Entrepreneurship, University of Manitoba, in Winnipeg (there is a whole blog to be written about my time there!) and it was really great.

The competition brought together some great judges, VC’s and Angel Investors as well and there was business to be done there!

The thing that I really noticed was the quality of the pitching at the event. Each company got to pitch for two minutes to a very large audience and then they did 10 minute pitches to a panel of three judges.

During the detailed pitches many companies used videos. Some used it badly and some used it with brilliant effect. Of course I am biased as Chairman of www.wooshii.com, I hope that more and more companies switch on to the benefits of using video to either explain their pitch or what the company does for consumers.

I am also on the board of another company, www.curingresin.com that recently used Wooshii to get a great video produced which explains what they do (which is very technical) in a great impactful way. It was also incredibly cheap to produce and is a great intro to the business on the website.

Adding a video to the deck you email a prospective investor is also a great idea as it gives you an engaging way to pitch your business. Sites like CrowdCube, (business crowdfunding), Kickstarter and IndieGoGo, (creative crowdfunding) have seen that projects with video pitches raise on average 122% more than those without – http://www.indiegogo.com/blog/2009/12/indiegogo-insight-videosraisemoremoney.html -

It is easy to see why when you thumb through some of the projects.
If you are pitching something which is difficult to explain or very technical, nothing beats using a great video to explain what you do. But, I think video can be very badly used.

First off there needs to be a discipline in terms of time. You can really have no more than 2 minutes of someone’s time – and the first 10 seconds will determine whether or not the entire video is viewed. Secondly it needs to be good quality. There is nothing worse that a poorly made video shot on someone’s webcam being used to try and pitch for my investment. I expect to see business plans that are well laid out, neatly formatted and professional in style. Your video should be the same to gain my confidence.

Of course, it is in my own interest for you to use Wooshii – but I recognise that many other companies provide video services. You should just look at using video to enhance your pitch.

But you have to make sure it doesn’t take over – or actually interrupt with the pitch. It has to enhance it.

Best of luck

Anyone who has been subjected to sit through one of my lectures, will know that I love Economics. I am so grateful to Mr. Shellard at my college for encouraging me to pursue this subject.

Economic concepts are so highly relevant to understanding business models and profits and I think more entrepreneurs need to understand concepts such as marginal cost and marginal revenue. But I think an important piece in this equation often gets missed which I hope to illustrate in this blog; the cost of acquiring and keeping a customer.

Marginal cost is simply the cost of producing the last unit. Some businesses have zero or very little marginal cost. So a cinema for example will have a zero marginal cost (the cost of allowing one more person to ‘consume’ a film). Equally, the transport industry has zero or virtually zero marginal costs. How much extra would it cost to sit one more person on an otherwise full flight from London to New York? Perhaps $50?

Economic theory states that providing you can cover the marginal cost (and do not confuse marginal cost with average cost) you are always better off making that trade. Profit is maximised where Marginal Cost is equal to Marginal Revenue. This is very much the pricing model that airlines and hotels adopt.

But, you can still be making big losses as a business even if you are covering marginal costs (because you may not be covering average costs). Again an airline may have a very expensive average cost of a flight – and the breakeven may be to get the flight 70% full. But given that most of the costs are going to be incurred anyway, providing they can get marginal costs covered, it is always a better decision to accept that additional ‘contribution’ to the average cost.

Digital businesses often assume that they have zero marginal costs. This is true to a certain extent. But what is often missed by a lot of businesses I deal with is the cost of selling to a customer and then keeping that customer.

It is easy to think of your cost of production – and thats it. But what about the time, effort and SEO cost that goes into acquiring that customer?
And many people will want customer service – that can be thought of as a marginal cost (if x% of people will phone and take up y% of time, you can add that to the cost). Often businesses fail to make a profit because they confuse this element as a fixed rather than a variable cost. The business plan assumes that this overhead is fixed and not related to sales volume. This is not true.

One of the companies I spent some time with recently, wanted to employ some account managers and I had to show them that there simply was not enough margin in their pricing for them to afford to do this (even though it would grow revenue).

Entrepreneurs have to remember the old adage from Economics “Sales is vanity, profit is sanity, but only cash is reality”.
Have you worked out the true cost of each sale?

I was recently coaching a great digital business based out of Halifax and we were looking at the issue of menu costs. The business theory is very simple; minimize choices on offer. By doing this, you reduce the inventory cost and the business becomes simpler.

He had tried this with his business and found that the revenues went down. I then remembered lessons I had learned from my experience at Amano (still miss you terribly Johnny RIP).

Consumers in our sandwich shop would always choose one of three sandwiches – and 80% of the time, they would have just one sandwich. But if you only offered the consumer the three sandwiches they want, they will really not like the lack of choice and go somewhere else.

This is very odd but it is a real phenomena. How would we feel about going to supermarket that didn’t allow us to ‘browse’? I know I don’t want to buy biscuits, but I want to see them there either to satisfy my sadomasochistic instincts or to congratulate myself on not buying them!

Most people feel the same way. Hence, you must avoid the temptation of only giving consumers what they want to buy? What they want to see and what they want to buy is not the same thing.

I also learned last week (during a fantastic pitching event in Winnipeg, Manitoba) that most consumers use the same formula to choose a bottle of wine at a restaurant. They will choose the second least expensive in any given category. Amazing and yet – they want choice. One of the whole points of a wine list is to be able to browse and choose thereby looking cultured.

This is not the same as ‘confusion marketing’ which mobile phone companies shamelessly use. This is where you deliberately confuse the consumer with too many choices and confusing ones, so that they choose one which is not the best for them.

Websites suffer from the same problem and Alan Sugar (whom I have to say really impressed me with his Biography) has always used menu pricing to help consumers feel they have choice in what they want to buy.

So the lesson; theory is great and just because you are doing something very clever in the digital world; basic rules of psychology still have to be understood and applied.

When I worked at PwC in Villiers Street, we had several sandwich stores right in front of us. I always used to go to Benjy’s (a cheap chain) and pay 99 pence for a ham and tomato. I could never understand why people would pay £2.99 for the same sandwich at Pret. It seemed madness to me.

And then one day, I was at a meeting with a client and someone had ordered sandwiches and I remember being totally and utterly wowed by how good it was; it was from Pret. Since that day I have become a premium sandwich addict. Extra quality is worth paying for.

I was reminded of this episode this week because it was the first time I was flying from Heathrow since I became an ‘Elite’ flyer. The perks of this status included being able to use the Star Alliance business lounge. I had always questioned why someone would pay £20 to use one of these lounges – and after just one trip, I am wondering how I survived without using it!

And it just got me thinking about the problem that a lot of businesses have is in persuading potential customers in a market that the premium service they provide is worth paying for. With a branded product like cars, clothes sunglasses etc, it has always been easier. With a service it is difficult because you are asking people to take a massive risk. They have to pay for something and they will only know if it was worth it when its too late.

So what can you do to de-risk this?

Well, if my experiences on both sandwiches and airport lounges are anything to go by, it is essential that you find a way to get customers to trial the product. With clever targeting you can ensure you are providing this service to just the right people.

Internet based services have always struggled to get consumers to pay for premium services (LinkedIn and newspapers for example). There are several reasons for this. Firstly, most people are too content with the free model that is often offered. (And I simply detest people who say Fremium model – what does that mean?) There is also the question of competition that is offering services for free.

And finally, many premium services require personalisation and personalised delivery that many digital companies are not best placed to deliver (and indeed it does not make economic sense for them to do so).

So if I can invent a meaningless word to compete against Freemium – it would be Trymeum!

There is nothing better than helping a client through the provision of a service that you just know is going to really help them. It is a case of all the interests being aligned. I remember watching a movie “In Good Company” (to be fair not a brilliant movie, but a great sales scene).

In the movie Denis Quaid is the senior sales person teaching a young up-start how to sell. They get a really good sale and Denis seems very pleased because he customer has got a good deal. “You really believe in this, don’t you?” asks the young up-start. “Of course, why else would you do it?” replies a slightly startled Denis.

There is a real truth in this and yet we all come across businesses and sales people where you sense the objective is just to make money rather than seeing making money as a by-product of providing a really useful service that adds value.

The business I have recently started up and am now focusing much of my attention on is www.springleads.com and I do not mean for this blog to come across as an advert for this business, but I want to use it to explain exactly what I mean by alignment.

My background is in sales and my career break came through my cold-calling efforts at PricewaterhouseCoopers. I was very good at it and went around the country training others across the firm on cold calling. It is something that I enjoy enormously and have a passion for.

With all of the mentoring I have done recently, I know that the big issue many start ups face is having to make many cold calls just to find the few customers that would be interested in talking to them. The most effective sales person in a start up tends to be the CEO, and yet the most precious resource they have is their time. Cold-calling for them is not a good use of their time.

www.springleads.com provides that service for them and for any other company that needs a large number of calls being made. So how did we set about differentiating between other call centres? Again through understanding the pain that start ups have, we were able to realise that having a set up fee and a minimum order number of hours acted as a barrier to many cash-strapped start ups. As such we set up a cost structure where there would be no set up fee and a flat £15 per hour.

Of course this is a plug for the business, but I hope it illustrates that when you are starting a business, it is important that you have (or you rapidly acquire) knowledge about the problem you claim to be solving. The other lesson is that you have to make money from the activity whilst still providing an enhanced service. So your cost structure has to demonstrate not just the needs you have – but also the needs of your client.

Ensure your personality and experience are aligned with your business and that most critically your business structure is aligned with the needs of your customers.

There is a widely held view that by understanding what is happening in a great artists life at the time of the piece of work you are enjoying, you gain extra depth and see more colours in the work. This I think is true. More people know about the personal hell that Van Gogh went through (in terms of cutting off his own ear) than recognise his work.

I have always felt this way about pop music and music videos; that is my culture and just because it is not very old does not make it less cultured. I remember listening to the Hothouse flowers song “Dont go”. It is an OK song, but when I learned this song was written for a friend who was dying of a terminal disease who wanted to give up, it took on a very powerful meaning for me.
It is very much the same thing in business. There is nothing wrong with being in business to make lots of money. But in my limited experience I have found that just isn’t enough as the commitment or ‘passion’ that is required to see you through the really tough and lonely times will not come from wanting to make just money.

I regularly meet people who are running business and want coaching from me when they get stuck in a rut. 8 out of 10 times they are actually looking for someone to take the business off them (or outsource the entire business). The real reason, which they dare not say is that they have either run out of steam or they did not realise how much hard work is required.

Business is great fun but it is a really hard slog. Great businesses take ages to come into fruition and cashflows never turn out to be accurate. It is something else that will drive you forward and that is passion. That is why I am nervous about people who are motivated solely by money; it really is not enough.

And getting back to the artist link, this is why funders often want to know more about the founding team and where there passion for the business and the idea came from. They are often testing the commitment the entrepreneur has to the success of the idea.

Trust me when I say there are much easier ways of making money than through entrepreneurship; but that misses the point. It is not about making money!

I have been operating this blog for about two years now and I really hope you have enjoyed reading the blog as much as I have enjoyed writing it. I think the brand is now out there; it is a blog which is trying to be informative and helpful to entrepreneurs and angels alike.

The thing that becomes clear is that it is a very diverse and dynamic field with many different views on every issue. Some blogs are technical in nature (when explaining certain concepts etc) but most are experiential.

As such, I would really like to welcome others to write guest blogs about their experiences in this world – but most crucially the lessons that they learned from the experience and what they would do different (if anything).

What I have learned from writing blogs and getting comments back and from mentoring in groups is that no one has all the answers and that working in diverse groups always creates better solutions. It is interesting that in crowdsourcing experiments, results always showed that groups of diverse abilities always perform better than groups of experts.

Mentoring and coaching are a fascinating activity because of the interaction and the dialogue. What I have noticed is that in forums where there are several mentors, the outcomes for the business are much better. Everyone has a different way of thinking and it would be great if that could come across in BusinessAngelBlog – at the moment it is my view (there have been two guest blogs to date) and I hope this forum becomes even better through other guest blogs.

Look forward to seeing your blogs soon. Please send them to me at pvalia@businessangelblog.com