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.

I have been back in London for just over a week now from Halifax so I thought it would be a good time to reflect and think about the lessons I have personally learned which may be useful to share with readers of the blog.

1. If you are thinking of doing business internationally – make sure you invest the right time and resource.

I went away for a very long five weeks to explore the business opportunities that existed in Canada for an extension of the Flight & Partners Fund Management Business. Five weeks is a long time – but you need to give yourself time at that level if you are serious about doing business in another country.

Many governments sponsor and support trade missions which last about two or three days. I am now skeptical about this approach (I was enthusiastic before my own experience). You personally need to walk the ground of a new foreign market. Find out how the market is organized and arranged. Find out who the key players are and meet them. Too many people take what I would now call the ‘Yellow Pages’ approach. This involves simply being matched with the right partner and then expecting them to be really motivated to help you sell your product in their territory. I am sure they will – but it will help them a lot more if they can see a visible commitment on your part.

You may respond that you cannot spare the time or money to do this. My answer to that is to not do it then! There is no point doing something unless it can be done properly. It is rather like starting a DIY job and then leaving it half way as you don’t have the time/ resources to finish the role.

2. Networking is a key skill that you really need to develop

Halifax is a very warm and friendly place. Even so, it did take me a good time and a great deal of effort to network my way around the place. And I had a big head start as before I got there I knew a few people whom I had met at an Angel Conference last October. By the end of my time there, I really felt that the enormous effort I had made to network with people had paid off as I had signed up some work by the end of my time there. I cannot stress enough how important it is to really develop your networking skills. And that does not mean paddling around at lots of mediocre functions handing out your business card and delivering an elevator pitch to anyone who will listen. Have a read of a previous blog about networking.

3. Before you sign any contracts, make sure you are comfortable with your partners.

Before I got to Halifax, I was planning to get into a business arrangement with some other parties. One of whom I had not met before. There is only so much due diligence you can do before you meet someone. The curious thing I realized is that my business life in London is remarkably devoid of contracts. Most of the work I do is with people I have known for more than 5 years – and in most cases an email is sufficient to lay out what has been agreed.

In Canada, from day one, there were lots of contracts flying around from the moment I got there. These were necessary to govern working relationships but in the end they proved futile as the partners in the original venture amicably agreed that we would not work together. It was a good thing that we did not sign a contract as it could have been very problematic to extricate ourselves from a contract. So the lesson for me is to always spend a proportion of time pre-contract which relates to the amount of time the contract would seek to govern. (For example the contract we would have signed would have locked us in for about ten years)

These would be the top three lessons – more next time!

One of the highlights for me of last year was to successfully start up a fund management business – www.flightandpartners.com The company is now managing over £12m and is doing well (very well if you consider the way the markets are performing). In the process of doing this though, I realized how much I enjoy setting something up.

Since December I have been working on another start up business. It is so exciting – it reminded me why I got into this area of business in the first place.

I went to see my first potential customer in Manchester on Friday last week and when he said yes – the feeling of utter joy was marred with my nerves jangling because I realized I now had to deliver!

Starting a business is one of the best feelings you can experience (along with jumping out of an aeroplane – but that is for another day!) You realize that entrepreneurs don’t do these things just for money but for the sheer thrill. I have met many would be entrepreneurs seeking investment from me in the last few years. I do get turned off immediately if I suspect the only desire driving the team is money. It simply is not enough to keep you going.

I also remembered a quote from an entrepreneur that I had worked with on a project a few years ago. She said that you do not have a business until you have a customer. The events of last week brought that to life for me.

Many of us come up with great business ideas and some of us may do something with this idea (like form a company) but very few take the critical step of turning that idea into a business. That is truly the scary bit – but it is about emotions rather than money.

I will not invest in a business that cannot prove strong customer demand. Sometimes all you need is a letter of intent or pre-orders and you have transformed your idea into a business.

My advice in this blog is to all of those of you who have a great idea but have not done something with it….

Go for it – make it happen. I promise you that even if you crash and burn – the thrill of having gone for it will give you a smile that will last for eternity. To misquote Dickens “Better to have loved and failed, than not to have loved at all”

All the best, and as always, I am happy to help.

Writing this blog has been really exciting and challenging. I have faltered on occasions in trying to keep up with a daily blog and I have settled on making sure there is at least something fresh twice a week. More than that is great and recent events have helped me write lots but I do hope that the New Year is actually less eventful.

There is a famous Chinese curse which most people think is a wish; “may you live in interesting times”. If anyone doubted that this was a curse, I think the events of 2008 have paid rest to those doubts. 2008 has seen Lehman Brothers, Woolworths, MFI, and Zoom airlines to name just a few companies go bankrupt and I do not think anyone could have predicted this (other than Woolworths) a year ago.

Of course it is sad and the cost to those thousands of dedicated staff who have given their working lives to these businesses is immeasurable. Schumpeter, a famous economist wrote about the ability of the market to engage in “creative destruction”. His argument was that capitalism has a built in ability to destroy lame companies and from the ashes arises new opportunities and new renewed strength.

There is a Darwinian sense to this. It is not about survival of the fittest, but survival of those that are most readily able to adapt to changes in the environment. On many occasions I have stated that it is this ability to adapt to change that is the key to business success. That is why most companies need to change management at different phases of growth. Each phase can call for different skill sets and experience.

Anyway, back to 2008. I hope it has been an exciting year for you. The highlight for me was launching this blog and launching and co-founding a fund management business. I received a cheque for £79 this week from Google and it was the first bit of money I have obtained from the Blog. So a big thanks to all you readers – and for clicking on those Google ads!

From my limited experience the biggest joy of running an enterprise is when you get the first cheque. It is a sign of validation of your project. When someone values your efforts enough to pay you for them – it is a great feeling!

May I once again, thank you for your support over 2008 and wish you the very best of luck for 2009. I have a feeling the next year is going to be a great year for new opportunities. Only the brave will be starting up – and the money is still out there!

In the midst of the financial meltdown, we were able to raise £11m – for the right team and business the money will always be out there.