Business Angel Blog

There is a lot of management speak about learning to overcoming your fear. Most of the fears we have are based entirely on very good reasons. For instance, I am very scared of Great White Sharks; that is a healthy fear. So last month, in South Africa, I went diving in the Ocean with some Great White Sharks and it was an awesome experience (one of the best moments in my life!) but it did not help me overcome my rational fear in the sense that I would never want to be in the Ocean with those beautiful animals without the aid of the cage that I was in at all time.

And we get on to talk about Entrepreneurship. One of my many pet hates is the way we are encouraged to become a nation of ‘risk-takers’. Entrepreneurship is not about risk taking, it is in fact the complete opposite. And risk taking is not in itself a good trait. I would argue it was the risk taking culture that existed in the investment banks that got our economies into the terrible mess we are in. Borrowing money is always a risk, and we in the West were collectively encouraged to take this risk; so the idea that risk taking is an inherently good thing to do is simply wrong.

The best business start ups I have been involved in are all about mitigating exisiting risks rather than being an exercise in taking risks. It is interesting to note that many of the biggest companies that exist today (Apple, Microsoft, Oracle etc) all started off as Consultancy projects where the basic product was developed at someone else’s expense and then scaled up and rolled out.

Business is not about taking risks and I will never invest in someone who shows off about the fact that they are a risk taker. That is also why I have had a problem with the over use of the word entrepreneur.

This is why a track record is so important for investors. It is recognising that the ‘entrepreneur’ has learned that running a business is not about taking risks but about managing risks.

My background is in sales and my first business (which I am still running) focuses on sales training. What is interesting though is that the best business lessons I have learned have probably been as compliance officer of Flight and Partners, the fund management business that I co-founded over four years ago.

It is all about recognising the inherent risks involved in business and systematically reducing those risks. It is the same as any extreme sport or back to cage diving with Great Whites. People engaged in those sports don’t advertise the risk, but rather focus on how the inherent risks are mitigated. Risk means there is a strong chance of different outcomes.

Let me tell you, I am not going into the Ocean with Great White sharks with someone who advertises the fact that they love taking risks. I can tell you, investment decisions are made on the same basis.

You may have noticed that I have only written about the [tag]investments[/tag] that I have made that have gone wrong for me. Why is that?

Well firstly, I think the world is already full of people who want to share their success with you (whilst success has many fathers, failure is an orphan!). Lots of investors, like gamblers, only talk about the ones that come in. Nothing wrong with that but we tend to learn very little from the ones that we tend to get right. If you are anything like me, you think that your successes are simply down to the fact that you are brilliant! (OK you may put it a little more thoughtfully than that, but the end conclusion is simply a variation of that premise!)

What you can do, if you are interested in learning, is stop and reflect after a failure and note down key points. Physically writing down your key learning points is a very powerful way to deal with the inevitable anguish that failure causes. I am writing this blog hopefully to share some of the lessons I have learnt from my failures – and it is not easy to publicly admit to them, but if other investors and businesses learn from these mistakes – then hopefully some good will come of it. There is a commercial reason as well – this blog is designed to be informative rather than one elongated gloat.

I also remember this story I learnt about Heinz (I don’t know if it is true – I am sorry). They do lots of product launches globally each year. Every time a product launch fails, the product manager responsible is invited to the HQ in the USA. There they fire a canon – this symbolises that they fire the canon not the person. The product manager is then invited to share the lessons learned and then this knowledge is added to the launch manual and shared around the world.

This encourages risk taking and learning. When I see companies pitch to me, I always ask the management team about any failures they have experienced. If they say they have not, I get nervous. If they say yes, I ask them what they have learned from that episode. Many would-be [tag]entrepreneurs[/tag] blame having the wrong team around them, or not imposing their view strong enough on the rest of the board. This makes me walk away. One of the people I have backed recently had a number of failures behind them. What he was able to demonstrate brilliantly was that each time he had learnt something powerful that in my humble opinion made him a [tag]better business person[/tag].

Alas, I can’t tell you how he did as that would be bragging about my success!

Happy learning