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Business as Theatre

Last week I spent two evenings at rather different spectator events – the first listening to Robin Klein at London Business School and the second watching David Hare’s new play about the economic crisis The Power of Yes at the National Theatre.  I have to say that I much preferred the former to the latter, not just because of the difference in ticket price I assure you! The play wasn’t the best I’ve seen – more of a Panorama-style documentary to explain to the man in the street what’s been going on.  Amusing to see actors portray Ronald Cohen, John Moulton, Adair Turner and others.  In fact the latter was sitting two rows in front of me and wore an expression of smiling relief having come out of it without criticism.  To my eye the audience was full of retired folk who probably came to see why they’d lost their pensions.  Wise then to steer clear of the stories about Madoff and Stanford and focus instead on what was wrong with the mainstream financial sector  – apparently awful people like Adam Applegarth and Fred Goodwin.  “Ronald Cohen” told us that on a scale between ‘interested in people’ and ‘interested in business’ Fred scored 100% at the latter end.

The stand-out lesson was about human nature – we are mainly influenced by our own recent past.  A long bull run and nobody remembers what went before indeed nobody remembers to even question what’s going on.  Is it enough for the banks to say ‘we had to do it because everyone else was’.  George Soros was quoted relating his own emigrant past to his personal expectation of discontinuous change.

Robin’s talk described his journey from buying into a tiny engineering business, relocating to the UK, a tense brush with a leveraged buyout, elevation to Corporate Executive and finally to a position where he was able to capitalise on the rise of the internet in consumer-facing businesses.  Now of course an investor in many early stage startups.  Some parallels with Soros’s formative years.  For me one section of the Q&A served to underline that setting up a venture capital fund staffed by analysts and deal-doers who lack mainstream commercial experience is more or less hopeless.  I am sure that’s one reason why performance in this asset class has been so poor.   Robin presented many learning points; David Hare sadly too few.


Review now available:



The Stage

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Delusions in the Equity Gap

I just finished reviewing a pile of business summaries from people seeking early stage/startup funding. It reminds me about this ‘Equity Gap’ thing – the main reason why people cannot get funded is that they don’t deserve it. Period.

It starts with the people who have the germ of an idea and nothing else. I mean nothing else… maybe just a bit of googling around it. Sometimes less. In fact I have even googled around ideas sent to me and discovered plenty competitors that the so-called entrepreneur didn’t even know about never mind understand. Someone at 3i told me that new recruits used to have to take it in turns to receive the cold calls made to 3i – there were so many looney tunes that it was demoralising to do it every day.

These ones made it into harcopy for review.

These ones made it into harcopy for review.

Then when people have worked up an idea so that it is looking more like a real opportunity they forget that it is in fact new to everybody else and so fail to drive home the killer points about why it will succeed. Too often the summary is a sort of contents page of the business plan that omits the real hooks – the special things about the team, the market, customers, timing.

Anyone experienced in investing will tell you how jaded they get seeing people asking for money for ideas they haven’t actually spent time developing into real opportunities or seeing pitches that are dull and don’t sell effectively.

So now you want my ten points on how to get over this…. well there are hundreds of sites where you can get those tips. Apparently some people cannot even be bothered to read them. Rant over.

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Accidental Entrepreneurs

FT: Accidental entrepreneurs

Accidental entrepreneurs

By Emma Jacobs

Published: March 31 2009 22:31 | Last updated: March 31 2009 22:31

Success by design: but it was a chance meeting that brought Greta Corke, Jon Sawdon Smith and Richard Woods (right) together as entrepreneurs

James Dunning may have started a business – Geotrupes Energy, set up to sell power from small wind farms to a large utility – but he claims to find the entrepreneur label “a bit repellent”. He tries to explain why he had never harboured ambitions to start a business: as well as distaste for the “entrepreneur” label, he says, there was also the lack of innate entrepreneurial traits (he describes himself as “risk-averse” and “an ideas desert”).

He had no desire to leave the security of his job as a corporate lawyer in 2003. “If you’d asked me 10 years ago to outline my future, ‘Not an entrepreneur’ would have been pretty high up there. If you cut me down the middle even now it would still say ‘suit’.”

Yet in 2003, he was made redundant from a failed division of utility company TXU, in a sector Mr Dunning had hoped would be immune to a downturn. His impulse was to update his CV and try to find another employer. But the prospect of a daily commute gnawed away at him. “I kept thinking if I get another City job I’m not going to see my four children grow up.”

So with an idea developed from “some work that had been going on [at TXU]…coupled with the input of the chap I ultimately teamed up with”, Mr Dunning became, in his own words, an “accidental entrepreneur”, setting up Geotrupes Energy in 2004.

While the stereotype of an entrepreneur is of someone born with a bullish zeal for business, the reality for many can be a confluence of chance. As Gordon Moore, the co-founder of Intel, said: “There is such a thing as a natural-born entrepreneur…But the accidental entrepreneur like me has to fall into the opportunity or be pushed into it.”

Chance meetings and luck – but lack of experience too

Chance can play a big role for entrepreneurs. For DIY Kyoto, the three founders’ biggest financial opportunity came about by luck: “It was accidental. A journalist wrote a profile on us for Blueprint [a design magazine] and then placed it in [the British Airways in-flight magazine]. We had tremendous interest from investors even though we were not investor-ready,” says Greta Corke, co-founder of DIY Kyoto, set up to market their home energy monitor, Wattson 01. Then followed a six-figure investment by bankers “who had made money and wanted to do something with it”.

But their lack of a business background also led to mistakes. “We did not invest in building a sales team early enough to capitalise on the opportunities…It can be hard to move away from being a designer and letting someone else execute the product,” says Ms Corke.

For Mark Greenhalgh, the transition from a caring profession as a family doctor to business also created problems: “I can be naive, I trust human nature. I’m not hard-nosed. I once believed I had sealed a big contract with a handshake – it came back to bite me.”

Keith Willey, professor of entrepreneurship at London Business School, says: “There is a lot of mythology around entrepreneurship. In reality, entrepreneurs are all types. Richard Branson is so un­typical. Most entrepreneurs don’t trade in the school yard. A lot of businesses are started by accidental entrepreneurs.”

Prof Willey says Mr Dunning is typical of entrepreneurs who get their ideas from ex­perience. “I see many people who have worked for a company – they may have proposed an idea that the boss turns down so decide to do it themselves. Entrepreneurial opportunities [can] coalesce when employees get stuck in their career or [are made] redundant.”

It was a combination of feeling stuck in his medical career as a general practitioner at the same time as gaining technical skills working in healthcare projects that pushed Mark Greenhalgh to set up a marketing agency, Flutter + Wow. “I felt a bit like a rat on a wheel…I needed to break free,” he says. Most of his clients are from the healthcare and pharmaceuticals sectors (“if you talk about something you know about, it helps”). Gradually, he is picking up contracts from consumer brands.

For some “accidental entrepreneurs”, the decision to set up in bus­iness may be down to chance meetings with certain people. Richard Woods, who graduated from the Royal College of Art in 2003 with an MA in industrial design, harboured no ambitions to become an entrepreneur, believing he would “work in a secure environment, possibly for Dyson”. But “it was meeting the other two [fellow RCA graduates Jon Sawdon Smith and Greta Corke] that made me think I could go into business.”

The three designers worked on a project start­ed at the RCA and developed a home energy monitor, Wattson 01. But it was not until they applied for a business development programme run by Nesta (the National Endowment for Science, Technology and the Arts) that the reality of being an entrepreneur sank in for Mr Woods. “I could see the potential of the product but it was going through the process of applying that I realised I wanted to commit to it. It made [me] realise we needed the motivation to see through the business.” The result was DIY Kyoto, set up by the three.

Sir Martin Sweeting went into business because it was the only way he could stay in the UK and work in the space industry.

“I’ve always been inventive and interested in practical things. When I was younger it was amateur radio, then Arthur C Clark and the moon land­ings happened and the two worlds came together. I developed a passion for small satellites, born out of tech and a practical interest.” But just as his interest was piqued in the 1980s, public funding for research in this area was wound down. “The only option was to get commercial contracts. The decision to go into business was a means to an end. I wanted to get money to do things that I wanted to do rather than money for its own sake.” An academic at Surrey university, he set up Surrey Satellite Technology (SSTL).

He says that money not being his principle motivation has, perversely, helped him become profitable – last year the company was sold to EADS for £50m. “If I had been focused on just business and making money, we might not have developed as we did. I wanted to make the UK the world leader in satellite technology. It took a long time to become profitable – 10 years. If I had been motivated by shareholder returns or profit we might not have made it. We had a couple of competitors whose focus was on profits. They went bust.”

While some may become entrepreneurs by accident, success takes commitment: “You have to work really hard,” says Dr Greenhalgh. “You can’t do it if you’re not strongly committed. You can’t be half-hearted.”

Mr Dunning agrees: “I worked hard and kept going with it.” He argues his tenacity was critical: “I have an ability to get whacked and still get up and keep going.” Prof Sweeting feels one trait has been key: “I was never frightened by financial insecurity. That gives you freedom – I wasn’t afraid of failing. Lots of people have ideas and want to set up businesses but fear failing.”

For an entrepreneur, there is no going back. After selling Geotrupes Energy (now operating under another name) in 2007, making a 30 per cent return for his investors and enabling him to take a break, Mr Dunning considered a return to corporate law. “I spent two months at a utility earlier this year and I really struggled. It suddenly seemed like a henhouse.” He is now working as a legal consultant. “I love the fact that I think about my business the whole time; in the shower, brushing my teeth…It’s a real buzz.”

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