things i wish i'd known (entrepreneur)

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Things I wish I’d known... Insights and inspiration from the journeys of successful entrepreneurs

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If you’re reading this booklet you are either an aspirant entrepreneur seeking guidance orinspiration, a successful entrepreneur seeing what worked for other people like yourself,or one of the many spectators who observe entrepreneurial people with a mixture ofbewilderment, envy and admiration. Whichever you are, we hope you will find thisbooklet of use, or at the very least of interest.Entrepreneurialism is a profoundly illogical business, involving as it does prodigious hardwork, enormous strains on personal finances, and often relationships too, and with a highrisk of failure bringing all the associated stigmas. On any rational basis nobody wouldembark on a business start-up; particularly involving new technology. So, why do they doit? Because, as these individual stories tell, at some deep psychological level they have to.Entrepreneurs are a strange and bewildering species; men & women, young & old,inspirational & perspirational, methodical and sometimes just plain lucky. However whatunites them is the journey.What we have attempted to do in this booklet is to assemble many different stories aboutentrepreneurial journeys and have deliberately sought to focus on the emotional ratherthan the practical. This is not a “how to do it” textbook, but we hope it might be a “why todo it” guide.We asked a broad range of technology entrepreneurs, many of them involved in spinoutsfrom universities, to provide a short letter addressed to an unknown aspirant techentrepreneur, offering insight into the personal aspects of the start-up journey. We haveimposed no constraints on the content of these contributions, other than a preference toavoid any litigation for libel!These are their own words and in our view each of them makes compelling reading. Webelieve they contain genuine and valuable insights into what it takes to embark on thejourney, but also how rewarding it can be at a personal and emotional level.The title was chosen half expecting that one or two might not have undertaken thejourney had they known the demands it would make. The surprise for us is the almostunanimous view of all contributors that the journey more than justified the cost.Furthermore, how many have now embarked on another journey in pursuit of anotherproject that may change the world in some way.We salute all these contributors and all the other entrepreneurs who share this ambitionfor change, and we hope that this booklet might make a small contribution to encourageothers to take the first step.

TRANSCRIPT

Things I wish I’d known...

Insights and inspiration from the journeys of successful entrepreneurs

Communicate

CommunicatePage1 Contents 2 Foreword3 Introduction4 Professor Peter Denyer6 Professor Jeremy Stone8 Steve Purdham10 Sherry Coutu12 Marc Moens14 Gwyn Humphreys16 David Tatchell18 Alasdair Rawsthorne20 Dr Ian T Muirhead22 Jed Hurwitz24 Dr Andy Richards26 Alex Hoye28 Ernie Richardson30 Ian Underwood31 Sir Robin Saxby32 Adrian Critchlow33 Acknowledgements

Contents

Thetestimoniesyouareabouttoreadspeakvolumesaboutthelevelofentrepreneurialtalentinthiscountry.Hereare16incrediblesuccessstoriesthatindicatewehavetheappetiteandtheskillsfromwhichtobuildworld-class,innovativebusinessesintheUK.

Theyalsoillustratethatthepathtosuccessisnotaneasyone–thereisalwayssomethingwecouldhavedonedifferently.Theysuggesttheneedforrelentlesspersistencefrom‘theentrepreneur’–persistencethatcanabsorbconsistentlosses,hugeamountsoflonelinessandthepresenceofpeopletellingthemitwon’twork.

Atthesametime,thebestentrepreneursarethosewhodon’tjustheroicallygoitalonebutunderstandtheimportanceofteamworkandcollaboration,especiallywhenitcomestocompanygrowth,andwhobuildastrongnetworkofcontactsandmentorsaroundthem.

Thisiswheregovernment,venturecapitalistsandallthoseinvolvedinsupportinganddevelopingentrepreneurshipneedtoplayabiggerrole.WemustlearnfromtheexperiencesofthosewhohavemadeitandworkhardertobreakdownthebarriersthatpreventevenmoresuccessfulbusinessesfromemergingacrosstheUK.

AtNESTA(NationalEndowmentforScience,TechnologyandtheArts) we’recommittedtosupportingseedstagecompaniesandactivelyinvestinsomeoftheverybestearlystagetechnologybusinessesintheUK.Wehaveaportfolioofover40companiesandareseekingtoinvest£50millionoverthenextfiveyearsintotheseedstage.Wecan’tdothisalone.WeareworkingtowardsthecontinuedimprovementofinvestorsoperatinginthisspacebothintermsoffundsizeandmanagerialexpertiseandwewanttoseemoreindividualswhowillnotonlyreaptheirownsuccessbutbeanessentialingredientinthesuccessoftheUKeconomy.

Ifyouwouldliketocommentonanyofthearticlesorhaveyourownstory,orovertimewouldliketoreadmorelessonsfromothergreatentrepreneursgotowww.nesta.org.uk/hindsight

Jonathan KestenbaumCEO,NESTA

October2007

Foreword

2

Ifyou’rereadingthisbookletyouareeitheranaspirantentrepreneurseekingguidanceorinspiration,asuccessfulentrepreneurseeingwhatworkedforotherpeoplelikeyourself,oroneofthemanyspectatorswhoobserveentrepreneurialpeoplewithamixtureofbewilderment,envyandadmiration.Whicheveryouare,wehopeyouwillfindthisbookletofuse,orattheveryleastofinterest.

Entrepreneurialismisaprofoundlyillogicalbusiness,involvingasitdoesprodigioushardwork,enormousstrainsonpersonalfinances,andoftenrelationshipstoo,andwithahighriskoffailurebringingalltheassociatedstigmas.Onanyrationalbasisnobodywouldembarkonabusinessstart-up;particularlyinvolvingnewtechnology.So,whydotheydoit?Because,astheseindividualstoriestell,atsomedeeppsychologicalleveltheyhaveto.

Entrepreneursareastrangeandbewilderingspecies;men&women,young&old,inspirational&perspirational,methodicalandsometimesjustplainlucky.Howeverwhatunitesthemisthejourney.

Whatwehaveattemptedtodointhisbookletistoassemblemanydifferentstoriesaboutentrepreneurialjourneysandhavedeliberatelysoughttofocusontheemotionalratherthanthepractical.Thisisnota“howtodoit”textbook,butwehopeitmightbea“whytodoit”guide.

Weaskedabroadrangeoftechnologyentrepreneurs,manyoftheminvolvedinspin-outsfromuniversities,toprovideashortletteraddressedtoanunknownaspiranttechentrepreneur,offeringinsightintothepersonalaspectsofthestart-upjourney.Wehaveimposednoconstraintsonthecontentofthesecontributions,otherthanapreferencetoavoidanylitigationforlibel!

Thesearetheirownwordsandinourvieweachofthemmakescompellingreading.Webelievetheycontaingenuineandvaluableinsightsintowhatittakestoembarkonthejourney,butalsohowrewardingitcanbeatapersonalandemotionallevel.

Thetitlewaschosenhalfexpectingthatoneortwomightnothaveundertakenthejourneyhadtheyknownthedemandsitwouldmake.Thesurpriseforusisthealmostunanimousviewofallcontributorsthatthejourneymorethanjustifiedthecost.Furthermore,howmanyhavenowembarkedonanotherjourneyinpursuitofanotherprojectthatmaychangetheworldinsomeway.

Wesaluteallthesecontributorsandalltheotherentrepreneurswhosharethisambitionforchange,andwehopethatthisbookletmightmakeasmallcontributiontoencourageotherstotakethefirststep.

Editors

Ernie Richardson Peter Denyer Sherry CoutuOctober 2007

Introduction from the editors

3

Professor Peter Denyer

Likeahostofthings–greatfood,forexample–readingaboutitisnosubstitutefordoingit!Besides,writingaboutsomethingsointimateasthecompanyIgrew,andlivedandbreathed,isgoingtobehard,isn’tit?Itturnsoutnottobe–Imusthavelearnedathousandlessonsingrowingandmanagingmybusiness.Belowaresimplythefirstfewthatspringtomind.

Problems

Withoutwishingtomakeitsoundlikeagameshow,lifeasanentrepreneurisacontinuousseriesofchallenges.Lotsofthem.Allthetime.Thatword–challenges–wasn’tchosenforitslinguisticprogrammingeffect;itisactuallyhowIcametoseethings.Thementalprocessisfascinating–somepeoplebelieveitcanbetaught,butIthinkithastobelearned.

Itgoessomethinglikethis:todayakeysupplierhaswarnedyouthatacomponentwillbefourweekslate.Onereactionisthattheskyisfalling,andthiswillbetheeventthatisgoingtofinishthecompany.Analternativeisthatyouhavefacedproblemsonthisscaleeverydayforasfarbackasyoucansee,andguesswhat–youandyourcompanysurvivedthem.Youmaynotbesurehow,butyouseemtohavetheknackofdoingso.Ihavenoidea,writingthis,howyouwillsolvetoday’sproblem,butifyou’vesurvivedthisfar,thenit’shabitual.Therefore,thereisnoneedtoworryaboutsurvival–youdon’thavetowasteanybraintimeonit.

Now,applysaidbraintotheprobleminhand,andtomorrowyou’llbelookingbackonthis,anotherproblemovercome.It’slikeaboathittingawave–thesituationlooksdreadful,butlikefivehundredwavesbeforehand,buoyancywinsagain,theboatbobsup,thewavehaspassed.

WhatI’mtrying,badly,tosayisthatyoucanandmustnaturallylearnhowtocopewithcontinualstress,andtounderstandthatthereisamentalplaneonwhichyoucandothis.

“No matter how hard you try, you cannot communicate enough.”Communication

Nomatterhowhardyoutry,youcannotcommunicateenough.Providedyou’recommunicatingthingsthatmatter,everyoneappreciatesit;suppliers,investors,staff,customers.Inhearingyoudiscussthebusinesssomeofyourenthusiasmwillruboffontothemeachtime.Ifyou’regivingsomeinsightintoaproblemalistenerwillnaturallystarttotakesomeownershipofit;theymayevensuggestasolution.Attheveryleasttheirnewknowledgewillaffectanythingtheydothatmightbelinkedinanyway.

I’manaturallybadcommunicator,anditembarrassesmetoadmitthatIhavetoforcemyselftodoit.ButalmosteverytimeIpushedmyselftocommunicateIgotapositivereturnonit.Youshouldalwaystakeanopportunitytohaveawordwithsomeone;eventhesimplefactthatyou’verecognisedsomeone,andtakenaninterest,cangiveaboost.

Onceyourbusinessreachesacertainsize,perhaps50ormorestaff,it’shardorimpossibletomaintainfrequentpersonalcontactwitheveryone.Analternativethenisaregularupdateofsomekindfromyou.Aweeklystate-of-the-nationemailtoeveryoneinsidethecompanyisonesolution;monthlynewsgetsabittoostale.Thereisnoneedtowasteresourcesinmakingthisglossy–butpeoplereallyvaluebeingtoldaboutdevelopments,andevenaboutproblems.Thisisalsoagreatwaytomilitatetherumourmill.Ifyou’vestatedaposition,oryourview,therewillstillberumoursbutthey’llhavemuchlesscurrency.

Thereisanother,deeplyfrustratingaspectofcommunicationthatInevermanagedquitetogetthebetterof;gettingyourstafftocommunicatewitheachother.Ican’tofferacut-and-driedsolutionhere.Icanonlytellyouthatinaprojectrequiringlotsofcommunicationbetween,say,twodesignengineers,theywillprobablynotcommunicateevenifyouseatthemwithinfivefeetofeachother.Thebestyoucandoistoassumethatcommunication,oratleasttherightdegreeofit,isn’thappening.Trycheckingtoseeifitis.

Peter was the founder and CEO of Vision

Group plc, the Edinburgh-based creator of

CMOS Imager chips used widely in digital

cameras. Vision was a successful spin-

out from his research at the University

of Edinburgh. Peter served as CEO of

Vision from its inception and early stages

in 1990, to its UK IPO in 1995. Vision

subsequently grew as a mainstream

fabless semiconductor company shipping

millions of units, before eventually being

sold to ST Microelectronics in 1999. Peter

is Executive Chairman of recently listed

MicroEmissive Displays Ltd and was the

co-founder and Chairman of Rhetorical

Systems.

4

Beforelong(hopefully)you’llhavegrownanexecutiveteam,andtheymustcommunicatealso.Generallythisisn’tsuchaproblem–peopleatthislevelunderstandtheimportanceofcommunication.Aweeklyinformalmeetingisagoodidea–atimeintheweekwhenthetopteamtrytobeinthesameroomtodiscussanythingandeverythingthatishappeninginthebusiness.AsfarasI’mawarethisworkswellforbusinessesaslargeasthelargestFTSE100companies,andassmallasyours.

Gratitude

Anoddtopic,Iknow,butanimportantone.Rather,it’simportanttoknowthatyoushouldn’texpectany.Inmyownbusinessduringitsnine-yearlifetime(exactlytheUKaveragetimefromstart-uptoexit,bytheway),IcancountononehandthenumberoftimesIwasthanked,ever,foranything.Thisisn’tsourgrapes.Ithinknonetheworseofanybodyforit;theysimplydon’tseethingsthatway.Ifanythingtheyaredoingyouafavour,andyourrewardswillbegreatenough(theybelieve).

PerhapsIdidn’tdoenoughthankingmyself,thoughIbelieveItriedandIencourageyoutodoso.Soyou’vebeenwarned,andthat’sallthatisintendedhere.

“For a company to survive and grow, its shape must change quite often.” Organisation (and change)

Foracompanytosurviveandgrow,itsshapemustchangequiteoften.Youshouldthinkaboutreorganisingaboutonceevery12months.Peopleshouldgetusedtothis,andseeitasahealthyprocess,notasapersonalthreat.Thereisnopointhereindefiningaperfectorganisation–itdoesn’texist.Thoughyoucanchangetheexistingoneforthebetter.

Inevitablychangeswillthreatensomeindividuals(thoughthisshouldbetheexceptionratherthantherule).Thiscanbetough,butyoumustlearntofaceuptoitifchangesareforthegreatergoodofthebusinessasawholeand,therefore,forthemajorityofitsstaff.

TheonlypracticaladviceIcangiveisthatnomatterhowbadthenews,whetheritbetheremovalofsomecherishedrole,orevenredundancy,peopleappreciatebeingspokentofacetoface,andbeingtoldhonestlywhyandwhatishappening.Itseemsalmostabsurd,butIhavehadsubsequentlyfriendlyrelationshipswithcolleaguesthatIhavehadtoasktoleavethebusiness.Itsoundslikeaplatitude,butoftensuchamoveisintheirinterestaswellasthatofthecompany.

The most difficult day

Unsurprisinglythereisalotofcompetitionforthisone.Afairlyclearwinnerhoweveristheday,followingnineyearsofexhortationfrommethatitwasus-against-the-world,Igatheredtogethermystafftoannouncethatthebusinesswasbeingsold.Ihopeyouhaveoneofthesedays!

5

Professor Jeremy Stone

I“WishI‘dKnown”Iwouldonedaybeaskedtowriteanopenletterlikethis;itwouldhavegivenmesuccourinhardtimesand,believeme,thereweremany.Infact,timesarenotnecessarilyeasiernow,justdifferentinlargepartbecauseanentrepreneurs’mindsetisnotonethatchangeseasily.Theoverachiever-neuroticthrivesontheshort-livedthrillofsuccessandtheterroroffailure.Thestakesandrewardsmaydiffer–thedriversaremostlyfixed.Recognisingone’sflaws,one’smotivatorsandthatoneseestheworldinsometimesdifferentwayscanbereassuring;ithelpspartnersunderstandyoursometimesoddbehaviourtoo

IwishI‘dknownthatnoteveryoneisanentrepreneur,nomatterwhatitsaysontheirbusinesscard.IwishI’dunderstoodbettertheinformalrulesofthegame,ratherthanassumedenthusiasmandyouthwouldtriumph–mostpeopleofferingmoneydon’tdeliverontheirpromise.Incontrast,ittookseveralturnstolearnnotalwaystotakethefirstofferoffunding.Inparallel,Idiscoveredthehardwayaboutshareholderregistersaslongaslimbs.

“I wish I had known that not everyone is an entrepreneur, no matter what it says on their business card.”IwishI’dunderstoodbettertheimportanceofhighquality,trustedprofessionaladvisors–Ruskin’ssayingnevertobuyonpricealoneiswisecounsel.Alawyerwhounderstandsyourquirksandfollies,yetaddsatrulycommercialperspectiveisagodsend.Dittoaccountantsandcorporatefinanciers.Theywouldhavehelpedmeunderstandthatlessisoftenmore–simplestories,welltold,engageinvestors.Equally,sharestructuresandinvestmentdocumentsonlyadvisorscaninterpret,probablysignaltroublesahead.

IwishI’dvaluedmuck-and-brassopportunities–manyhavepassedmebyandbecomesuccesses.Ifellvictimmorethanoncetoegointhisandmanyotherareas–humilityisacoreskill.

“I back the team now first and foremost.”ThepoweroftheteamissomethingIpreachbuthaveforgottenalltoooften.Ibacktheteamnowfirstandforemost.OnstartingoutIassumedtheideatookprecedence.

IwishIhadknownthedangersofthinkingtoowideandtoofarahead,ratherthandealingwithtoday’sissues.Abetterunderstandingofthe80/20rulewouldhavedonenoharmeither–Ihavedelayedlaunchingproductsorservicestoolonginsearchofperfection.

Ishouldhavevaluedmoretheimportanceoflegacyoverfinancialreward–workingforthelatterrarelybringstheformer.IwishI’draisedmoremoneythanIneededandworriedlessaboutthedilution–insteadI’veenduredpainfulrenegotiationswhencashranshortandseenmystakeultimatelyworthless.

“I wish I had learned to communicate better in all directions.”IwishIwaslessseducedbytheideaofanIPO–magicalwordsthatmeancolossalanddistractingworkload,onlytoexposeyourbusinesstoinvestorsandanalystswithoftenscantinterestinanythingotherthantheshorttermandthequickbuck.

IwishIhadlearnedtocommunicatebetterinalldirections,andfeltconfidenttorepeatthemessagewhenIbelieveditwasclear–inequalmeasure.IwishIhadunderstoodthevalueofsimplicityofmessagetofast-growingfirms,overBlueSkystrategy;andavoidmanagement-speakatalltimes.

After an academic hospital medicine

career, research in aviation medicine

and business school, Jeremy worked as

a senior strategy consultant at Gemini

Consulting, Inc. with numerous healthcare

care systems and pharmaceuticals,

before becoming CEO of US-based

global pharmaceutical outsourcing firm,

Snyder Healthcare. Since 1999, he has

created more than a dozen successful

healthcare and investment companies,

including Medical Futures, Mediary®

and Lattice Growth Partners. Jeremy

is Founder and Chairman of Merchant

Ventures Investments Ltd, which is

acquiring niched fund management and

financial service firms to create a next

generation bank. He also recently became

Chairman of Communication Direct Ltd,

the UK’s leading 3g mobile reseller and

HSBC Best New UK Company, 2006.

Jeremy maintains academic affiliations at

the Welsh Institute for Health and Social

Care, University of Glamorgan where

he is visiting Professor in healthcare,

technology and enterprise.

6

“The journey is often superior to the destination.”IwishI’dstartedyoungerandIwishIappreciatedhowmuchfamilyandfriendswouldsupportmebeyondwhatwasreasonableorfair.IwishI’dknownitwasOKtohavefunandinsodoingnottakenmyselfquitesoseriously–thejourneyisoftensuperiortothedestination.

Communicate

7

Steve is currently CEO of We7 (www.

We7.com), the new free digital music

destination. He originally founded

SurfControl plc, a global internet security

company, which was recently sold for

just over $400 million. Steve has been

recognized by many prestigious business

awards, including: IOD Director of

the Year, Technology CEO of the Year,

Technology Entreprenuer of the Year, and

Techmark Personality of the Year.

Steve Purdham

Ifyouhaveevertriedtoguideateenagesonordaughterthroughtheminefieldoflifeandhelpthemfrommakingthesamemistakesyoumade,thenyouwillknowthattheensuingtantrumandabusequiteoftenleavesyouconfusedandindespair.

“Opinions are like backsides, everybody has got one.”Asaspeciesweseemedtohavedevelopedamentalblocktosuchadviceasameanstoensurethatexperienceistheonlywaytoreallyunderstand.Soventuringintotheworldofsomeoneelse’s“ThingsI’dwishI’dknown”intheirbusinesslifeisimmediatelyfraughtwithproblems,andactuallythatisgoodbecauseIhavetostartmyeulogywithtwowarnings.•Bewareofperceivedwisdom!•Opinionsarelikebacksides,everybodyhasgotone(wewillcomebacktothisonelater)Sothefollowingismypersonalexperienceandyouneedtodismissallorsomeofitasyouseefit,enjoy.So“ThingsIwishI’dknown”,forme,fallprimarilyintotheemotionalaspectsofbusinessliferatherthatthestandardquantitativeandprocessdrivenelementsofbusiness.AllbusinessissueswillfallintothehoppersofPeople,Process,TechnologyandPolicy.Theycanbesolvedandtaughtwithtime,effortandunderstanding(zzzzZZZZ)butformeit’stheemotionalaspectswhicharethingsthatseemtobubbleunderthesurfaceofyourexecutionuntilthereisasuddeneurekamoment.Quiteoftenitturnsout(asalways)tobecommonsensebuthey,someofusaremorecommonthanothers.Solet’sdivein.

Avoid the negative

Inbuildingandrunningapublictechnologybusinessyouarefacedwithreportingyournumbersandstrategytotheshareholdersevery90days.Thisputsyouinfrontoffinancialjournalistsonaregularbasis.Theeurekamomentforthisonecamewhen,afterreportingquarterafterquarterofsuccessforyears,Ibecamefrustratedthatweneverseemedtogetanysignificantcolumninchesinthebusinesspress.SoIaskedthejournalist“Why?”andthereplywasilluminating–“Steve,givemegoodnewsandIwillwriteaparagraph–givemebadnewsandIwillwriteapage.”

Sadly,thisistheworldweliveinandwearesurroundedbyconstantreasonswhynottodosomething,howdifficultitwillbe,you’llneverbeabletodoitthatway,etc.TheBritishcultureseemstoamplifythismorethanmostculturesIhavemetovertheyears.Whetherit’sdowntotheoldclasssystem,whenitwasseenasalmostasintotryandbetteryourselfIdon’tknow,butdespitethemanyfalsesmilesandwordsofencouragement,itisafactthatweliveinanegativeandunhelpfulworldandthatistheworldthatasanentrepreneuryouhavetonavigate.

It’ssimpletotestthis;askanyonehowtheyareandonthewholeyouknowwhattheresponsewillbe–gloomandmisery.Ialwaysanswer“Brilliant–Fantastic”;it’samazingthealmostshockedlookyouget!Tryit!

“Trying and winning is much better than trying and failing, but doing nothing is always a fail.”Failure is acceptable

ThereisanimplicitfearoffailureintheUKandthepotentialstigmaassociatedwithitbasicallyfreezesmostpeopleintoastateofindecisionandparalysis.WhenRobBarrowandItriedtogetfundingforSurfControl,we“failed”foralmosttwoyearsseeingVCafterVCafterVC,NomadafterNomadafterNomad,etc.Failureisnotwrong–ifyouhavefailedyouhaveatleasttriedandthat,inbusiness,isthemostimportantthingyoucando.I’lladmitthattryingandwinningismuchbetterthantryingandfailing,butdoingnothingisalwaysafailsofindthatbeliefandgoforit.

8

DecisionsMakethemandrememberthatadecisionisfornow,notforever.Toooftenpeopleeitherdon’tmakedecisions,oriftheydo,theystaywithitforever.Thisisafactformostpeopleandeitheryougetfrustratedoryouhelppeople.

Therealityisthingswillchangeandyouhavetoadapt.IrememberoverhearinganewemployeeinourBostonofficebeingtaughtaprocessbyanexistingemployee.Thenewemployeequestionedthewaywedidthejob,andtheresponsewas“We’vealwaysdoneitthatway”,atwhichpointIhadtointervene;wehadn’talwaysdoneitthatwayasthedepartmentdidn’texistthreemonthsearlier.Thedecisionthathadbeenmadewasrightatthetimebutthatwasthen;thingschangesobeopen-mindedandmoveon.

“Just Do It” – Learn to trust your instinctsOneofthebiggestfrustrationsIhavehadinbusinessiswhythingstakesolongwhenthereisnoreasonforitandIeventuallyrealisedthatthebiggestgapindecidingtodosomethingandthendoingitisthe“justificationperiod”.

Whenpeopletrytomakedecisionsor(eventually)makedecisions,lotsoftimeislostbeforetheythenexecute.Thistimeislostaspeoplelookforallsortsofwaystosupportthedecisionthattheyhaveorareabouttomake.

Ifyouthinkaboutthelastbigdecisionyoumade,yourinstinctwouldgettotheansweralmostimmediately,therestofthetimeisthenspentinjustifyingyourdecision.Ilearntyoucanmakedecisionsfasterandgettothe“justdoit”bitextremelyfastifyouspotwhentheworkyouaredoingisnotforquantitativejustification(whichshouldstillbedone),butratherthanqualitativereasonstomakeyoufeelthatyouhavemadetherightdecisions.Ifthiscanbedoneproperly,youdon’tsavetrivialamountsoftimeyoucansavemonthsoryearsinprojectsandexecution.

“Choose your friends and advisors with great care.”Keep the faith, stay focused and believe

Isaidatthebeginning,opinionsarelikebacksides,everyonehasone.Asyougrowyouwillbesurroundedbyadvisors,consultants,lawyers,NEDs,corporatefinanciers,accountants,etc,etc.Manyareexcellent,butsomemoreexcellentthanothersandtheyallhaveopinions.Quiteoftentheseopinions,bytheirnature,crossthelinefromthefactualadvicethatyouneedtomakeadecision,intothepolarisedviewsofanindividualwhowillprobablyhaveneverbeeninyourshoes.Youmayneedhelpinspecificareasbutyourpositionofcommandrequiresthatyouownthedecisionandyouhavefaithinyourvisionandexecution.Sochooseyourfriendsandadvisorswithgreatcare.

Translating funding speak

OvertheyearsIhavebeeninvolvedwithraisinghundredsofmillionsofpoundsinfunding.ButIwishIhadoneofthoseBerlitzphrasebookswhenIstartedoff.ThetwophrasesIhavelearnttowatchoutforare“GoodLuck,letusknowhowyougeton”and“Greatidea,butwewouldliketoseealittlemoreprogress”.Thefirstisanobvious“no”asVCsdon’tlikesaying“no”justincasetheygotitwrong.Andthesecondgreatfavouriteofmine“Greatidea,butwewouldliketoseealittlemoreprogress”means“Iamnotpreparedtotaketherisk.Goanddowhatyousaidyouwoulddoifyouhadthemoney(butwithoutthemoney),andthencomebackwhenthereislessrisk”.

VCsandinvestorsonthewholedon’tknowthattheyaredoingit,butyoucanendupdoingalotofpointlessworktryingto“MakeProgress”.Therearemanysuchphrases;don’tletthemputyouoff.Justbeawareofthemandrollwiththepunches.

“Always take a moment and celebrate the small achievements for yourself and your team around you.”Sothatconcludesmylittlejourneyofdiscovery.IfyouarestillwithmeatthisstageIassumeyouwillbereadytogivemethe“teenagetantrumandabuse”,butwhateverhappensinyourjourney,alwaysdoonething-alwaystakeamomentandcelebratethesmallachievementsforyourselfandyourteamaroundyou(whoattheendofthedayarethepeoplethatreallymakeithappen).

9

Sherry Coutu

Iampleasedthatyouareconsideringstartingupyourowncompany.Ican’tbegintodescribehowrewardinganexperienceitcanbe.Iwouldverymuchencourageyoutoembarkontheroad–assumingthatyouaresurethatitwillbesomethingworthdoing.

“The company you are starting has the chance of solving someone’s problem.”What do I mean by worth doing?

Imeanthatthecompanyyouarestartinghasthechanceofsolvingsomeone’sproblem.Betterifthatproblemisabigone!Excellentiftheproblemisbigandthenumberofpeoplewhohavethisproblemishugeandgrowing!Inmyexperience,ifyouaresolvinga“bigproblem”foracustomer,thenitiseasytoattractpeopletoyourteamandtomotivatethemtofocuson“solvingtheproblem”.Itiseasytobecomeseducedby“anidea”or“ascientificbreakthrough”or“acooltechnology”thathasnoproven(orconceivable)customerdemandforit.“Musthave”solutionsaresomuchmorecompellingthan“nicetohave”solutions.Ithastobesomethingthatyouthinkisgoingtogetyououtofbedinthemorningandkeepyoufromgoingtobedatnightfor,well,thebestpartofadecade.

You need a great team – with one you can achieve the impossible

Successfulbusinessesrequireateam.Bigproblemsrequireateambecauseiftheproblemisworthsolving,itwillsurelytakeabunchofpeoplewithcomplimentaryskillstoaddress.Anotherbenefitofagreatteamisthatyoumakegreatfriendsasyousolvemoreandmorecustomerproblems(andaremoreandmoresuccessful).IamstillworkingwiththefolksfromthefirstcompanyIfounded.Fiveyearsonfromthe“exit”,westillenjoysolvingproblemstogether.SometimestheproblemsweareworkingoutarewithcompaniesIhaveinvestedin,sometimeswiththecompaniestheyhavesubsequentlysetup,sometimeswiththecompaniestheyhaveinvestedin.Solvingproblemsissomethingentrepreneursdo.

“An entrepreneur listens to evidence and then makes decisions based on educated guesses.”If you ‘feel’ something, you are probably right

OneofthebestpiecesofadviceIhadfromoneofmymentorswasthatanentrepreneurlistenstoevidenceandthenmakesdecisionsbasedoneducatedguesses.Hesaidthatthosewhowerecapable,butultimatelyunsuccessfulinbusiness,likedtoanalysethingsfromeverydifferentdirectionandthenreflectforalongperiodoftimeandthengathermoreinformationtocheckbeforeacting.Hesaidthatitwasatransitioneveryoneneededtomakeastheymovedfromtheacademicworldtothe“businessworld”.Thisisalsosomethingthatisalludedtointhebook“Blink”byMalcolmGladwell.Don’tprocrastinate!Justdoit.Farbettertomakeamistakethantomisstheopportunityandletsomeoneelse“win”thecustomer.

Timing the window is critical

SomethingIwastaughtinbusinessschoolandhavebeen“lucky”withsinceistiming.Ifyousetupthecompanyto“sellit”(which,ifyouarereadingthisBVCApublication,mustatleastbesomethingyouareconsidering),thenyoumustbemindfulofwhichcompaniesmighthavean“appetite”forbuyingacompanylikeyours.Youmustalsobemindfulofwhatyourcompetitorsaredoing.Ifallyourcompetitorsgetboughtbythelikelyacquirers,thenyouwill“miss”yourwindowtosellyourcompany.Anotherwindowmightbeaverylongtimeincomingormightnotcomeatall.Keepingacloseeyeonthetargetacquirersandcompetitorsissomethingyoushouldgetfromyourindependentdirectors,VCbackersandangelinvestors.

Sherry pursues a portfolio of interests,

which include early-stage technology

investing and serving on the boards of

companies, charities and universities.

Sherry established and successfully exited

two financial services software companies:

the first was acquired in 1997 and has

operations in more than 70 countries

and the second was floated on NASDAQ

and the London Main Market in 2000

and serves 1.7 million retail financial

customers in the UK.

It takes more time than you will think

Ihadtolaughrecentlywhenafriendofmine(alsoanentrepreneur)reported“Iamontheseventhyearofatwoyearproject”.Hehadfloatedhiscompany,andwasstillverypassionateaboutit.Customersdon’talwaysadoptthingsasquicklyasyouthinktheywill...eventhoughtheyshould! Different investors have different agendas and interests – you need to reconcile them

BeforeIfloatedmycompany,angels,VCsandtradeinvestorshadinvested.IdidnotrealiseatthetimetheextenttowhichtheinterestsofthesepartiescoulddifferortheamountoftimethatitwouldtaketoreconcilethemsothatIcouldgetthecompanythroughthenextstageofitsdevelopment.Makesurethatyouanticipatethisandthatyouworkouthowtopullthemintoalignmentbeforehandsothatthereisnochancetheir“non-alignment”canderailasale/IPO.

Angels/Trade Investors are great! Angels/Trade Investors are horrible!

IhadsometerrificandsometerribleangelsinmycompaniesandthecompaniesIhaveinvestedinsubsequentlyasan“angelinvestor”.Onethingisclear:Angelsarenotcreatedequal!Mybestangelstoryrevolvesaroundoneangelwhohadbeeninvolvedinsettingupmorethan70companiesandhadfloated20ofthem–hehelpedthecompanythrougheverythingincludingtheIPOandsubsequentacquisitionofthecompany.Ihavealsoseensomeangelstoobusyrunningaportfoliooftheirintereststhattheydidnothavesufficienttimetodevotetothecompany.Thesetypesslowdownthecompanyandultimatelyitisbesttoaskthemtoleavetheboard.Thesamethingscanhappenwithtradeinvestorrepresentatives.Lessontolearn:makesurethatthepersonsonyourboardhavethetimeandinclinationtohelpyougrowyourcompanyasquicklyastheopportunitywillallow.

VCs are great (my own) VCs can be terrible (vicarious)

IwasluckywithmyownVCs.Theyweresupersmart,experienced,ambitiousandgreatpeople.Theycreatedallsortsofopportunitiesforthecompanyandhelpedusovercomeavarietyofobstaclesthatareexperiencedwhencompaniesgrowveryquickly.OntheotherhandIhaveavarietyoffriendswhoareentrepreneursandhavenothadthesameexperience.Beverysureaboutthevalueyourinvestorscanaddandmakesureyouasktheentrepreneurswhotheyhavebacked,howtheyaddvalueandwhattheyarereallylikeafterthe“deal”hasbeendone.Therearealsositeswhichhelpyouseewhatotherentrepreneursthink–www.thefunded.com.Anotherthingtobearinmindisthattherearemanypeoplewhowillclaimtheycan“help”yougetfinancing.Bearinmindthatforthem,itisjustadealthattheywillmakecommissionfrom;theywillnotneedtolivewiththeconsequencesfordecades.

“Cash is King.”Forecasting is something that needs to be done all the time – is there gold in them there hills?

Itisevenmoreimportantafterfundingtochecktheinformationyouputinyourbusinessplanforecastsiscorrect.Isthepricingright?Adoptionasyouthought?Whataboutretention?Otherwise,youmayfindthatyourunoutofthemoneyyouraisedfasterthanyouanticipated.CashisKingandyoureallyreallyreallydon’twanttotrytoraisemoneywhenyouareoutofit.Ifyouareagreatscientistordeal-doer,thenmakesureyougetsomeoneonyourteamwhocankeeptrackofthecash.

“Business is a marathon, not a sprint.” It is hard, but not impossible to lead a balanced lifestyle

GiventhatIhavechairedboardmeetingsfromthelaboursuiteofahospitalandIwasfivemonthspregnantwithmysecondchildwhenmycompanyIPO’d,itseemsabitrichmakingthisstatement,butitisimportanttotry.Idon’tthinkitisreallypossibletokeepthingsinbalanceeveryday,buttrytokeepaneyeonit.Youwillalwaysneedyourhealth,familyandfriendsandyouwillbeabletokeepupthemarathonifyoumaintainthem.Businessisamarathon,notasprint.

If you don’t try, you will never know

Itishardtodescribewhatitisliketohavemillionsofcustomersusingtheservicesofacompanythatyoucreated.Itisalsohardtodescribewhatfinancialindependencefeelslike.Itisalsohardtodescribewhatitfeelsliketoknowthatmostofthepeoplewhobackedyoumadealotofmoneyfromdoingso.Justsufficeittosay,itfeelsreallygood.Goon,giveitago!Therearealotofreallybigbadproblemsthatneedtobefixedandyoumightbeinasuperbpositiontomakeareallybigdifferencetotheworldweliveinandwillleavetoourchildrenandgrand-children.Howgoodwouldthatfeel? 11

Marc Moens

Whenyouareabouttostartacompany,justaswhenyouareabouttoinvadeaforeigncountry,thereare,toquoteDonaldRumsfeld,knownknowns,knownunknowns,andthereareunknownunknowns.

“As your company grows, you make sure your skill set grows.” Known unknowns

Thisistheeasiestcategory.Therearedoubtlessalotofthingsyouknowyoudon’tknow.However,whenyouknowyoudon’tknowsomething,that’sactuallyquitegood.WhenIstarted,IknewIdidn’tknowanythingaboutfinancialreporting.ThatturnedouttobelessofaproblemthanIhadanticipated.Asyourcompanygrows,youmakesureyourskillsetgrows.Andthenyoureachapointwherethecompanyisbigenoughtohiresomeonewhocantakeoverthistaskandwhoisproperlyskilledtodoit.Inmycase,wegotafinancedirectorafterourfirstfundinground.Untilthatpoint,Ididthefinancialreportingtotheboardandtothetargetinvestorsmyself,withalotofhelpfrommymentorandourfriendlyaccountants.Itwasn’tabigdeal;itwasaknownunknown.

Soknownunknownsare,kindof,easy.Buttheyareimportant,becausetherearesomanyhelpfulpeoplearound,andyouneedtomakesureyoucallontherightpeopleattherighttimewiththerightquestions.Irememberearlymeetingswithrepresentativesfromorganisationsthatassiststart-ups.Theysaid“WecanhelpyouwithX,Y,andZ.Doyouwanttocomeonacourse?”Isaid“Actually,IneedhelpwithA,B,andC.”Theysaid“Hmm,interesting.Anyway,wecanhelpyouwithX,Y,andZ.Doyouwanttocomeonacourse?”Knowingwhatitisyoudon’tknowandwhereyouneedhelpisimportant.

Known knowns

Thatthereareknownknownsmayseemobvious:perhapsyouaretheworldexpertincoldwaterducts,andthat’swhatyourcompanyisgoingtobeabout.Sothat’saknownknown.

“The only way you can decide whether it is worth giving all this up is by having a clear idea as to why you are doing it.”Butbeforestartingacompany,thereisamoreimportantissuethatIthinkpeopleshouldturnintoaknownknown,andthatisyourreasonforstartingthecompany.Idon’tthinktherearegoodorbadreasons,butyouneedtoknowwhatyourpersonalreasonis.Settingupandrunningacompanyisanall-consumingactivity:youwillspendlesstimewithyourpartnerandyourchildrenthanyouimagine;yourholidaysandweekendswillbedifferentfromthoseoffriendswhoarenotdoingastart-up.Ifyouthinkworkissomethingthatyouhavetodowhileyou’dratherbedoingyourhobby,thenyouarelikelytobecomeunhappyinyourstart-up.Theonlywayyoucandecidewhetheritisworthgivingallthisupisbyhavingaclearideaastowhyyouaredoingit.Itcouldbethemoney,althoughIthinktherearelessriskyandlesstime-consumingwaysofearningreasonableamountsofmoney.Itismorelikelythatitissomethingyouneedtogetoutofyoursystem–provingtoyourselfthatyoucandothis.Oryou’vespentalotoftimethinkingtheoreticallyaboutabunchofproblemsandyounowwanttoshowthishassomepracticaluse.Orperhapsyourcareerhasreachedaplateauandtheonlywayyouaregoingtomoveuporremainsaneisbystartingyourowncompany.Whateveryourreason,makesureitisaknownknown,soyoucanremindyourselfovertheyearswhyyouaredoingthis.

Anotherthingyoushouldmakesureyouhaveveryclear,isknowingwhatyourroleisandwhattheroleisofanyco-founders.Forexample,atechstart-upmightneedatechnicalbrainwhohasinventedversion1oftheproductandisalreadydreamingofversion2.Youmayalsoneedanengineeringgeniuswhocanimplementanddeliverversion1.1andthenversion1.2and1.3,andwhowillmakesuretheproducthas

Marc co-founded Rhetorical Systems in

2005, which developed leading edge text-

to-speech systems. In December 2004,

Rhetorical was acquired by ScanSoft, a

US-based speech company. Marc left

ScanSoft in 2005 and since then has been

involved as an advisor in a number of

IT startups. Marc graduated with a PhD

at the University of Edinburgh where

he ran the Language Technology Group

and worked on information extraction,

text summarisation and other language

engineering technologies.

12

documentationandisrobustandrunsondifferentplatforms.Thispersonisprobablydifferentfromthetechnicalvisionary.Youwillalsoneedsomeonewhocansellthevisionbehindthecompany.Thisgoesbeyondtalkingaboutthebrillianceofthetechnicalinventionortherobustnessofthefirstprototype;youneedsomeonewhocandeliverthevisiontopotentialinvestors,tolandlordswhothinkit’stooriskytorentoutspacetoastart-up,topotentialemployeeswhomightbetakingariskjoininganunknownventure,andtocustomers.Youalsoneedsomeonewhocanturnthetechnologyintosomethingthecustomerwantstopayfor.

Itisunlikelythatasinglefoundercandoallthesethings.Youneedtoknowwhatyouknow,youneedtoknowwhatshouldbeyourroleinthecompany,and,ifyouhaveco-founders,youneedtoknowtheresponsibilitiesofeachofyourco-founders.Thefoundersarelikelytohaveanequalstakeinthecompany,butitshouldn’tfollowfromthat,thatthereisnohierarchybetweenthemwhendecisionsneedtobemade.Inthescenarioabove,youwouldneedtodecideiftheengineeringgeniuscanoverrulethetechnicalvisionary,andwhetherthelattercanoverrulethecustomer-facingevangelist.

“Getting some of these apparently small things wrong can have very visible consequences.”Ifyouarethesolefounder,oryouaretheleaderofateamoffounders,itmaycomeasabitofashocktorealisethatnothinginyourbrandnewcompanywillhappenunlessyoumakeithappen.Thisisn’tjustaboutdesigningtheproductandhavingasalesstrategyandattractingcustomersandshippingaproductontime.It’salltheotherthingsyoumayhavetakenforgrantedinyourcareersofar:havingastaffmanualandapolicyaboutstatutoryholidays,arrangingworkpermitsfornewemployees,makingtravelarrangementstogoseeacustomer,makingsurethereispaperbythephotocopier,andthatthewastebasketsgetemptied.Infact,makingsurethattherearewastebaskets…anddesks…andchairs.Ifyou’reincharge,youhavetomakesureallthishappens.Gettingsomeoftheseapparentlysmallthingswrongcanhaveveryvisibleconsequences.Becauseofthat,thesmallthingsmaystarttakinguptimeandattention,whichyoushouldbespendingonthemoreimportantthings.Somakesureyouhavesomeonealongsideyouwhocanorganisethis,andalotmore,withoutevenneedingtobeasked.

Unknown unknowns

AmongstthethingsIdidn’tknowIdidn’tknow,istheimportanceofhavingamentor.Whenyoustartyourfirstcompany,youneedsomeonewhohasbeenthroughitbefore,whoiswillingtostandbyyou,whowilllistentowhatyouaretryingtodo,whowillstepinwhennecessaryandbeinvisiblewhenthat’sappropriate;someonewhocangiveadviceonsmall,practicalissues,commentonlargerstrategicissues,orofferadviceonlifeissues.Atmyfirstcompany,wewerelucky:wedidn’tsetouttofindamentor,butamentorfoundusandbecameourchairman,orwasitviceversa.It’simportantyoufindthatmentorveryearlyoninyourstart-upprocess.Anddon’twaitforittohappenbyaccident.Makeithappen.

Therewasonemajorunknownunknownatthestartofmyfirstcompany:themarketforourproductwasalotmorecomplexandfragmentedthanIhadanticipated,withanintricateeco-systemoflargeandsmallcompaniesprovidingallorpartofasolutiontowhichweonlycontributedasmallcomponenttechnology.Thismadeitquitehardtogettractioninthismarketortogetlock-inwithcustomers.Wedidwellinturningthisrestrictionintoauniquesellingpoint,butitwasharderthananticipated.

“Education is the path from cocky ignorance to miserable uncertainty.”Inowalwaysrecommendthatpeopletryandunderstandthemarketeco-systemtheyareenteringwiththeirnewproductortheirnewcompany.However,ifIhadknownthenwhatIknownowaboutthecomplexityofthismarketweenteredallthoseyearsago,Imighthavedecidednottostartthecompanyatall.MarkTwainsaidthateducationisthepathfromcockyignorancetomiserableuncertainty.Whenyoustartacompany,cockyignoranceisnotnecessarilyabadasset.

13

Gwyn Humphreys

BradfordParticleDesign(BPD)wasahugeamountoffun,butwasprobablythemost“totalcommitment”activityofmylife–andinembarkingonsettingupandrunningyourowncompany,oneofthekeythingsyoumustbearinmindatthebeginningisthatyourfamilywillneedtobeveryunderstanding,andlong-suffering.Theywillbearthebruntofallthebadthingsthathappen(andtherewillbeplentyofthose,eveninasuccessfulcompany),andalsoyouarelikelytobe“away”muchofthetime,whetheritbelatenightsortravelling.However,thejoyandhugesatisfactionthatcomeswithsuccessiswhatitisallabout–andthecompetitivenatureofacademicresearchshouldstandyouingoodsteadinthisregard!Indeeditisthesuccessthatyoushouldbedrivenby–andinbusinessthatwillbringitsownfinancialrewards,whichshouldreallybeviewedasasecondary,althoughgratifyingresult.

Innoparticularorder,hereareafewofthekeythingsthatIlearnedalongthewayandsomeofthemwerelearnedbydoingthingsthewrongwayfirst.

Setting up the company and negotiating with the university (assuming it is a spin-out company!)

Expectthistobeasurrealexperience.Universitiesarebytheirnaturetotallyrisk-averse–nosurprisethere.However,companiesareallaboutrisk.Youareproposingtotakeahugeriskwithyourlife,familyandincomeandalltheUniversitywillseeisahugeopportunity.Iftheydonotsecurethemaximumpossibleequity,theywillbeblamedlaterifthecompanyisverysuccessful.Equityislikeland–oncethemomentofcreationisdonewith,theystopmakingit.Yournegotiationpositionatthebeginningisthereforeveryweak,butitisworthperseveringandtakingaslongasittakestodoagooddeal.Agood(andthereforefair)dealmustrecognisethenurtureandsupportwhichyouhavehadfromtheuniversity,butalsotheriskandcommitmentwhichyouaretakingon.Intheendbothpartiesarekeenonsuccessandthedealmustnotbesoskewedastode-motivatethefounders,asthiswillleadtofailureinmostcases.

Think and plan ahead for ALL eventualities

Thingsseldomgotoplaninasmallcompany,andwefounditextremelyvaluabletoplanthemainstrategy(onanyissue)butthentoruminateonalltheotherpossiblescenarios.Consequently,whenthingsdidnotgoaccordingtothemainstrategy,wecouldeasilyshiftourplanningandactions.Thisway,asfaraspossible,wewerealwaysaheadofthegame.

“No one person can realistically grow a significant international business. Build a team ethos, and play to each others’ strengths.”Build a close, trusting team around you

Noonepersoncanrealisticallygrowasignificantinternationalbusiness.Buildateamethos,andplaytoeachothers’strengths.Companiesarenotegotripsforthefounders.Yourstaffarekeytothesuccessofthebusiness-makesurethatyoutreatthemfairly.Encouragestafftogrowwiththecompany;theskillsandloyaltyofyourstaffareparamount.However,anequallyimportantpointisthatyouMUSTdealwithdifficultpersonnelissuesfirmlyandpromptly;suchissues(especiallyinsmallcompanies)donotgoaway–andtheytakeupincreasingtimeandenergyanddistractyoufromrunningthebusiness.TakegoodHRadviceearly!

Many of the problems later encountered by small companies are created early in their lives

Forexample;keeporganisationalstructuressimple,untilyouneedtodiversifythem.Avoidtoomanyinternalmeetings–theywillleadto“meetings-lock”,theequivalentoftrafficgrid-lock;peoplegettoperceivethattheyareonlyvaluediftheyareseenatmeetingsandtheamountofactualworkthatgetsdonedecreasesdrastically.Considerrestrictinginternalmeetingstoonlyoneortwodaysaweek.

Gwyn founded Bradford Particle Design in

2005 as part of the School of Pharmacy at

the University of Bradford. The company

developed a new particle-formation

technology using supercritical fluids

allowing the generation of particles of

very defined crystal structure and size.

Focusing on the area of pharmaceuticals,

the company grew rapidly, working with

most of the world’s largest multinational

pharmaceutical companies, eventually

being sold in January 2001 to a Californian

company, Inhale Therapeutic Systems Inc.

14

Make maximum use of all the commercial contacts which you have made during your research career

Youwillhavecredibilitywithsuchcontacts,anditiswellworthtryingveryhardtogetthemtocollaboratewiththenewcompanyveryearlyinitslife.Yourcredibilitywithinvestorswilloftenbegreatlyenhancedbyhavingearlydealswithsignificantcompanies;itvalidatesthetechnologyofyourcompanyanditreducestheirperceivedrisk.Furthermore,earlyrevenuesmayreduceoreliminatetheneedtoseekventurecapitalfunding.Thefirstequityinvestmentwillalwaysbeoneofthemostexpensive,andallrevenueswillhelptolimitthecashrequiredfromtheVCfunding.Inthiscontext,grantsarereallyvaluable,BUTonlyiftheyleadtoyourobjectives,andarenotdistractions,manageriallyand/ortechnically.

Paradoxically,althoughthenewcompanyhassprungfromyourtechnologyandscientificdevelopments,thesuccessofthecompanywillprobablybemuchmoredependentintermsofitssuccessonnon-technicalissues.HR,financialandbusinessdevelopmentaspectsofthecompany,alongwithcarefulnurtureoftheintellectualpropertyresources,arelikelytobethekeyissueswhichwilldeterminesuccess–althoughofcoursethetechnologybaseisafundamentalgiven.

“You will spend too much of your life running the company for it not to be also great fun.”Finally,youwillbeundercontinualstressasyoucreateandgrowthecompany.Youwilllearntocopewiththis,butdoensurethatthecompanyisalsofun.Youwillspendtoomuchofyourliferunningthecompanyforitnottobealsogreatfun.So,asyouembarkonthisnewventure,Iwishyourealluckandmuchfun.

15

David Tatchell

Imustconfesstofeelingalittleuncomfortablewiththisassignment–partlybecauseIdislikepreaching(almostasmuchasIdislikebeingpreachedto)–butmainlybecauseIcanseeadangerofsettingoutself-evidentplatitudesasiftheywerethekeystobusinesssuccess.

IhopethatwhatIhavetosayisnotentirelyself-evident.However,asI’msurehasbeensaidonmanyoccasions,business(likemanyotherthings)islittlemorethanappliedcommonsense.Sodon’texpectrevolutionaryideasorrocketscience!

WhatIpresenthereislargelywhatIhavelearnedoveralmost20yearsoftrying(sometimessuccessfully,sometimesnot)topilotasmalltechnologybusinessthroughaseriesofsuccessesandcrises.AllIcanclaimisthebenefitof20:20hindsight–whichIhopewillbeofsomehelptoanyonenowsettingoutonasimilarjourney.

Keep your vision

Whenwestartedoutalmost20yearsago,we(meandmyfellowfounders)wereoftenasked“Whydoyouwanttodothis?”Asthequestionwasmostoftenaskedbysomeonewhowewereaskingformoney,wefeltthatwemightbeexpectedtoemphasisefinancialsuccessastheprimarydriver.However,wehada“vision”whichwasnotspecificallyaboutfinancialsuccess(Iwon’tsaywhatitwas–youwillhaveyourown)so,inanswerto“thequestion”,thiswaswhatwetalkedabout.

Ilearnedlaterthatthiswas“therightanswer”.Thevastmajorityofsuccessfulfoundersofbusinessesarenotinitprimarilyforfinancialsuccess-theywantto“changetheworld”insomeway,andthegettingrich(ifithappens!)isaby-productofsuccessinachievingtheirvision.

“Keep hold of your visions and dreams for your business, and don’t be ashamed if they are somewhat idealistic.” So,myfirstpieceofadviceistokeepholdofyourvisionsanddreamsforyourbusiness,anddon’tbeashamediftheyaresomewhatidealisticand(atfirstglance)un-businesslike.Theyarewhatwillgiveyourbusinessitsdistinctcharacter,energiseyouandkeepyoufocusedthroughgoodandnot-so-goodtimes.

“Whatever your product offering is, it doesn’t just need to be attractive to customers, it needs to be compelling.” See the world through your prospective customers eyes

Whateveryourproductofferingis,itdoesn’tjustneedtobeattractivetocustomers,itneedstobecompelling.

WhatImeanbythisisthat,inordertogeneratecashflowandsatisfyinvestorgrowthexpectations(rememberthatBusinessPlan?!),youwillneedtogeneratesalesquickly.Butyouwillbeasmallcompanythattheprospecthasneverheardof.Sowhyshouldtheprospecttakeyouseriouslyandwhyshouldtheybuyfromyou?

Youneedtohaveaprettycompellinganswer,orthedangeristhattheprospectwillignoreyou,orequallybad,putoffanypurchasingdecision.Youneedtheprospecttomakethedecisiontobuy,andtobuynow.Ifyoucan’tputyourhandonyourheartandsay“IfIwasthecustomeritwouldbeano-brainer”,thenyouneedtochangeorimproveyourproduct/service,orreconsideryourtargetcustomer(areyoutargetingthebestmarketforyourproduct?).

David founded Flomerics, an engineering

analysis software business, in 1988. It now

employs over 200 people in 12 countries,

and trades on AIM with a market cap of

£12m. Before founding Floremics, David

received a PhD in Mechanical Engineering

from Imperial College, London.

16

“Business is a team game – and you will need a team with the right range of skills, experiences, temperaments, and personalities.”Pick the right team

Businessisateamgame–andyouwillneedateamwiththerightrangeofskills,experiences,temperaments,andpersonalities.

Presumablyyoubringstrongtechnicalskillstotheteam–andpossiblyotherstoo.Youwillneedtoaddothertechnicalpeopletomanagetechnicalaspectsofthebusinessandalsotocoverforyou,asyoufocusincreasinglyonthe“businessleadership”role.Youwillprobablyhavegoodtechnicalcontactsfromyour“previouslife”.However,thefirstchoicesmaynotalwaysbethebestones.Don’tsimplychoosefriendsorpeopleyouhaveworkedcloselywithinthepast–youwillneedpeoplewiththerightpersonalities,managementskills,peopleskills,and“toughness”,aswellastherighttechnicalknowledge.

Plus,youwillneedtoaddpeoplewith“newskills”–sales,marketing,finance,possiblyHR,legal,etc.Tomymindtherightwordhereis“balance”.Youwillneedhigh-levelskillsandexperienceinalltheseessentialareasofthebusinesstocomplementyourtechnicalteam’shigh-leveltechnicalskills–andyouwillneedtotreatthemasofequalimportancetothebusinessasyourtechnicalteam.Infactonecouldarguethatsomeroles–salesandfinanceforexample–aremoreimportant.Theyneedtoberespectedassuch.

Be prepared for setbacks

PerhapsIshouldreallysayexpectsuccess(thisleadstoconfidence,positiveattitudes,therightkindof“buzz”inthebusiness),butbepreparedfortheinevitablesetbacks.

Onedangerofsetbacksisthereactionofyourteam,forexample,thefeelingthatthisisthefirstsignofthingsgettingmuchworse.Youmayfeelthisway.Whetherornotyoudo,itislikelythatsomeofyourcolleagueswill,andtheymayspreadthisnegativitytotherestoftheteam.Thereactiontothesetbackcanthenbecomeabiggerproblemthanthesetbackitself.Yourchallengeasleaderwillbetocounteractthis.

Itstartswithyourreaction.Youmaybethekindofpersonwhocanbouncebackveryeasilyfromsetbacks.If(likeme)you’renot,thenyouwillbenefitfromhelpfromotherstogiveyouperspectiveandregainabalancedviewofthesituation.Identifypeoplewithinoroutsidethebusinesswhocansupportyouincircumstanceslikethis.

Theninfluencetherestofyourorganisation.First,byopencommunication;givinganhonest,balanced,viewofthesituation–andmakingitclearwhatisbeingdonetoresolvethesituation,andhowindividualscancontribute.Second,byexample–byreflectingapositiveoutlookinyourinteractionsandyourdemeanour.

Inotherwords(asIhaveoftentoldmyselfduringtoughtimes),itisnotthesetbackthatistheissue,itishowwereacttoit.

It’s all about other people

Ithasbecomeaclichétotalkabouta“peoplebusiness”,butitisnonethelesstruethateverythinginbusiness(andultimatelythesurvivalofabusiness)isallaboutotherpeople,insideandoutsidethebusiness.Howthesepeoplefeelaboutyourbusinessandreacttoitwillgovernitssuccessorfailure.

Ihavecometoapproachthisbytryingtoseethesituationfromtheotherperson’sperspective,andtotrytobehaveaccordingly.Forexample,ifIwereastaffmember,howwouldIliketobemanagedandtreatedbymycolleagues?Ifacustomer,howwouldIliketobesoldto?IfIwereauserofoursoftware,howwouldIliketobesupported?Itseemstomethatifeveryoneinacompanytriestoliveuptoidealsofthiskind,thentheyarebuildingexactlythekindofpersonalandbusinessrelationshipsthatwillensuretheircompany’slong-termfutureandsuccess.

17

Alasdair Rawsthorne

IfoundedTransitivealmostsevenyearsago,basedonthefruitsoffiveyearsresearchattheUniversityofManchester.HereareafewthingsthatIwishII’dknownbackthen!

It takes longer than you think

Whenwestartedtheoriginalresearchprojectbackin1995,wealwaysknewthatifweweresuccessful,wecouldprobablyfindamarketoutletforthetechnology.Originally,wewouldhavebeenveryhappylicensingthetechnologyforafewhundredthousand,butasweengagedwithpotentialcustomers,ourhopesbecamemoreambitious,notbecauseanyoneofferedusmoney,butbecausewebecameincreasinglyconvincedthatwecouldsolvereal,meaningfulindustryproblemswithourtechnology.

Butitthentooktwoyearsfromthestartofourserioussearchforinvestmentuntilweclosedourfirstfundingroundandstartedthecompany.Itthentookanothertwoyearshardgraftbeforewesignedourfirstmeaningfulproductioncontract.Thiswassomuchlongerthananyonehadoriginallythoughtorplanned.IwishI’dknownjusthowlongittakestoconvincecustomers,evenoneswhoarewillingtobetonnewtechnologies.

Smart Money is worth more than what you pay for it

HavealookatForbesMagazine’s“MidasList”ofthetop100technologyventurecapitalists(http://linksviewer.com/MidasList/Pages/MidasList_07-09.html).Nowworkouthowyouaregoingtogetoneofthosepeopletoinvestinyourcompanyandsitonyourboard.

Thecommonperceptionoftop-tierVCsisofpeoplewithlargeaddressbooks,whocancallinfluentialpeopleinyourindustryonyourbehalf.Thatwasmine,too.Butwhenyouhaveoneofthesepeopleonyourside,youactuallygetfarmore.

Theydon’thavetomakephonecallsonyourbehalf;theyareroutinelyengagedwithallthemoversandshakersinthetechnologyindustry,andeat,breatheandsleepthedynamicsinthewholeindustry.Youmaybedeeplysteepedinyourbusiness,buttheyaredeeplysteepedintheindustry,andhaveabreadthofexperienceandbusinessinsightthatwillsaveyouliterallyyearsofexploringblindalleys.

Youmayfinditdifficulttoattractthesegiantsintheearlystages;youmayneedtoconsciouslybootstrapyourselftothatlevel.Youmayfind,withsometop-tierVCsthatyouenduppartingwithmoreequitythanalessdemandinginvestormightbehappywith–butit’swortheverypercent.

Be prepared to start letting go

Ondayone,youownthevisionofyouroperation,andyoualsoownallofitschallenges.IwasTransitive’smarketing,sales,CFO,VPofengineering,headofHR,officemanager,ITspecialist,andahundredotherthings.Asthecompanygrows,youhandovermanyofthosetaskstootherpeople.Makesureyourecruitpeopleintothoseroleswhocandothembetterthanyoucan!Butasthatprocesscontinues,youwillfeelyourjobgettingnarrowerandnarrower,hopefullytoapointwhereyoucanconcentrateonthethingsyoudobetterthananyoneelse.

Butsometimes,justsometimes,youwakeupwithafeelingofnostalgiaforthedayswheneverysinglethingthathappenedtoyourbabyoperation,happenedwithinyourattentionspan.Andyoufeelasenseofbereavementthatthereisstuffhappeningthatyoudon’tevenknowabout!

If it feels wrong, it might possibly be wrong

Youholdthevisionforyournewcompany.It’syourdream,andyou’veputalltheingredientstogetherandyouhavesettheinitialdirection,bothstrategicallyandtactically.However,youhavealsoassembledateamofstrongpeople,eachwiththeirownideasofwhat’srightandwhatneedsdoingrightnow.

Hopefully,you’veappointedrealexpertsinallofthedifferentareasthatyouneed,soyoucantrusttheirjudgmentandgivethemtheautonomyandresponsibilitytheyreally

Alasdair spent 20 years in research at

the University of Manchester focused on

microprocessors and microcomputers,

and their associated operating

systems, device drivers, compilers, and

development environments. In 1995, with

a team of graduate students, Alasdair

began development of the Dynamic

Binary Translation software that launched

Transitive in October 2000.

18

needtobesuccessful.Occasionallyyouwillseethingshappenthatcauseyoutothink“holdon,that’snotright!”Youwillbetemptedtotrustthejudgmentoftheexpert–butoccasionally,theymaymakedecisionswhich,althoughsensibleandjustifiedindividually,starttodepartfromyouroriginalvision,strategyoryourproductpositioningwhentakentogether.Learningwhentostepinandchallengethesedecisions,andwhentotrustyourexperts,isthehardestthingI’vedone,andIthinkI’vegotitwrongontoomanyoccasions.

It still takes longer than you think

Apple’sannouncementoftheproductthatusesoursoftwarewasahugemediaeventinJune2005.ThefirstproductswereintroducedinJanuary2006,toravereviews,andthelastofthepreviousgenerationwerereplacedjust7monthslater–anextraordinarilysuccessfultransitioninthecomputerindustry.

Sonow,everythingshouldbeeasy!Oursuccessstoryshouldproceedahead,andeveryoneelseintheindustryshouldbelookingatouringredientinApple’ssuccessandsaying,“Iwantapieceofthat,too!”

Wrong.Ourothercustomerseachoperateinadifferentsegmentofthecomputermarket,andeachisconvincedthattherequirementsoftheirend-usersaresodifferentthatourtechnologycan’tpossiblyworkforthem;computerserversaredifferentfromApplelaptops,andembeddedsystems,andhand-portablesystems,anddefencesystems,andsoon.Everyoneineachofthesedifferentsegmentsneedstobeconvinced,point-by-point,thatwecandeliverthemrealvalue.Weknowwe’regettingclosertothe“tippingpoint”,whengreedwilldriveourcustomersmorethanfear,butwestillhaveawaytogo.

19

Dr Ian T Muirhead

WhenfirstaskedtorecallthingsIwishI’dknown,Ithoughtofmanythings.Butafterfurtherthought,therearetwowhichifIhadknowninmyearlieryearswouldhavemadesubsequentsituationsaloteasier.ThefirstistheneedtohaveIPassignedtothecompanyattheoutset.ThesecondistheimportanceofunderstandingwhereaVCisinitsfundinvestmentcyclewhenitmakesitsinitialinvestmentinyourcompany.

Assigning IP

Thestartingpointformostacademicuniversityspin-outcompaniesisthenegotiationofthelicencetothetechnologythatthenewcompany(NewCo)isgoingtobebuilton.

IPassignmentisoftenthemainpointofcontention.ItisveryimportanttogetthiscornerstoneoftheNewCoright,ifthecompanyistobeattractivetopotentialinvestors.Youneedtoavoidhavingtore-negotiateaspectsofthelicenceagreementdownthelinebeforeanyVCinvestorwillputtheirmoneyintothecompany.

EveryuniversityhasitsownapproachandviewsontheroutesoflicensingtheirIP.Iftheprincipalofaspin-outcompanyhasbeenagreed,anditisknownthattheNewCowillrequireVCfundingtogrow,thencertainparametersneedtobetakenintoconsideration;IPassignmentbeingoneofthem.Thereisnoblueprintonnegotiatingtheassignmentbutindustryormarketsectornormsforroyaltyonsalesoftheproductareagoodstartingpoint.

Allpartiesarelookingforafairandequitablereturntakingintoaccount;(i)therelationshipbetweentheexpendituretoestablishtheIPpositiontodateanddefendingitinthefuture;(ii)theexpenditurerequiredtodeveloptheIPtoamarketableproduct;and(iii)areturn(thoughtheirpositionsmaydifferonwhatthatmeans)ontheseinvestmentstakingintoaccounttheassociatedrisksinvolved.

Parametersworthconsideringwhennegotiatingvarioustrade-offsinthelicenceagreementwouldinclude:

•Whatisitsperceivedvalue,i.e.howfundamentalistheIPthatisbeinglicensedtotheproductandmarketsector?

•WhatequitywilltheuniversityholdintheNewCo?•Whatroyaltyonsalesoftheproductwilltheuniversityreceive?•WillfutureIPdevelopedattheuniversity(bytheoriginatorsorothers)beaccessibleto

theNewCo?ThiscouldbethroughdirectaccessonequivalentroyaltytermsorrightoffirstrefusalforemergingIPinthesameproductormarketspaceastheNewCoisoperatingin.

•Assignment;atwhatstageandunderwhatterms(themostfundamentalbeingatwhatprice)willtheIPgetassignedfromtheuniversitytothecompany?

•Isthereanendpointtotheperiodofroyaltypaymentsand/oristhereanagreedformulatobuy-outfutureroyaltypayments?

Oftentheselasttwobulletpointsdonotgetsufficientlydefinedattheoutsetofthelicence.ManyVCshavehadbadexperiencesofdealingwithassignmentofIPjustbeforeatradesaleorIPO,where“thecompanyisheldtoransom”andthishasmadethemparticularlysensitivetotheseparameters.

Thelicencenegotiationprocessisfurther“complicated”bythefactthatthefoundersareoftennegotiatingwiththeuniversity(theiremployer)onbehalfofthemselvesandonbehalfofNewCo.EquallyifthemechanismfortheIPassignmentisnotagreedattheoutsetthentheuniversityinduecoursewillfindtheyarenegotiatingwiththeNewCoasbothownerofthelicensedIPandshareholderincompany.Thiscanleadtoconflictsofinterest.ThiscanbeavoidediftheassignmentoftheIPisdealtwithupfrontatthetimeofnegotiationoftheoriginallicence.

UniversitiesareoftenreluctanttoassignIPtoearlystagecompaniesforfearthattheIPwillnotbedevelopedandcommerciallyexploited,eitherthroughthecompanyfailingorbecausetheIPisshelved.TheVCsdesiretohavetheIPassignedatthetimeofinvestmentoftenincreaseswiththeamountofmoneytheyneedtoinvestinNewCototaketheproducttomarket.ScenariosandtimingofIPassignmenttoNewCocaninclude:

Ian is currently VP of Business

Development at Biosensia Ltd, Cork,

Ireland. In addition, Ian works as an

independent Business Consultant

specialising in early stage technology

spin-out companies from Universities.

Previously, he has held director, senior

management and business development

posts in a range of companies, including

CEO of Terahertz Photonics Ltd, and

Business Development roles in the

multinational ST Microelectronics and

VISION Ltd, a company which went from

university spin-out to IPO.

20

•Atthetimeoftheinvestmentoratatimewhenanagreedsumhasbeeninvestedinthecompany•Afteranagreedtimeperiod•Afteranagreedminimumroyaltyorequivalentmonetarysumhasbeenpaidtotheuniversity•Whenthecompanyhasreachedanagreedvaluationpoint

IhaveencounteredthislastsituationmorethanonceandmyrecommendationwouldbetogetalicencenegotiatedattheoutsetwhichhasaclearandworkablemechanismforassignmentoftheIPtothecompanyandhascappedroyalties(byvalueortime)oranagreedmechanismfortheirbuy-out.Thiswillreducetheneedforare-negotiationbeforeaVCfundwillputmoneyintotheorganisation.

Fund Investment Cycle

ThesecondpointistheimportanceofknowingwhereaVCfundisinitsinvestmentcyclewhenitmakesitsinitialinvestmentinyourcompany.

Theidealscenarioistobeanearlyinvestmentinanewlargefundfromaninvestorwithindustrysectorexperience.ToreduceaVCsriskofsubsequentdilutioninfuturefunding,theyalwaysprefertobeabletofollowontheirinitialinvestmentshouldthatberequired.

Theriskprofiletheinvestmentfundwilladopttendstobehigheratthestartoftheirfundinvestmentcyclethanmidwaythrough.Howeverifafund’sportfolioofinvestmentsisdoingverywell75%ofthewaythroughtheinvestmentcyclethenthisriskacceptabilitycanriseagainforlaterinvestments.Thisisprovidedthefundhassufficientmonieslefttofollowonitsinvestmentshoulditberequired.

ProblemscanarisewhenyourchosenVChasinvestedinyourcompanyfromonefundandwantstoaddtothatinvestmentfromoneoftheirlaterfunds.Most,ifnotall,VCfundsaresetupwithcleardefinedrulesabouthowtheycancrossinvestinportfoliocompaniesfromdifferentfunds.

TypicallyonefundcannotinvestinacompanyalreadyinvestedbyanotherfundfromthesameVChouse,withoutathirdpartysettingtheprice.Thisisdonetoavoidtheoriginalinvestorusinganalternativefundtheymanagetoshoreuptheirinitialinvestment.Thisinprincipalsoundsfineaslongasathirdpartyinvestorcanbefoundinthetimescalesrequired,andthatthethirdpartyinvestorsetsavaluationonthecompanythatisacceptabletothecompanyandtheoriginalinvestors.

Myrecommendationsarewherepossibletakeyourinvestmentfromafundthatisattheearlystageofitsinvestmentcycle;wherethisisnotpossiblethengointoitwithyoureyesopenandtrytofullyexplorethepossiblescenariosoffutureinvestmentroundsandhowtheVCwouldhandlethem.

21

Jed Hurwitz

Ienteredthesemiconductorfieldslightlybyaccident,graduatingwithageneralelectronicsdegree;Ifacedachoiceofcareerpathsasdiverseaspowerstationstomicroelectronics.Iwentwith“chips”partlybecauseafriendwasofferedajobbythesamecompany,PlesseySemiconductors,andpartlybecauseIthoughtitwouldbefun.IwishIcouldsaythatmydecisionwasmoreinformed,butIreallydidnotknowthatmuchaboutit–sometimesyoujusthavetogowithyourinstincts.

“Invest in people, identify their potential and make them feel that they are part of the success.” Iwasfortunateinmyfirstjob,tofindmyselfattractedintoCMOSanalogdesignandtohaveaboss,IanPhilips,whotaughtmetwogoodlessonsthatItrytocarrythrough,ineveryendeavourthatIenterinto.Firstly,technologycanbeappliedtoanythingto“improve”itsfunction;itisjustaquestionofinformedimagination–youjustneedtoidentifywhataretheactualproblemsthatneedtobesolvedinordertomakeabetterproduct.Secondly,investinpeople,identifytheirpotentialandmakethemfeelthattheyarepartofthesuccess–financialrewardisnottheonlyfactor;externalrecognition,trainingandresponsibilityareoftenequally,ifnotmoreimportant.However,makesureyoudoitbyconsultationandoccasionallybysurprise-itismuchmoremotivatingthaniftheyhavetoask.Icannotre-iteratetoomuch,howimportantitistobeactivelyinvolvedinthefutureofyourteammembers;ifitisdonerighttheywillrepayyou10timesover.

Whenyoubuildateam,itisvitalthatyougetagoodmixtureofskillsandbackgrounds.Thereneedstobepeoplewithindustrialexperienceaswellasthosefromacademia.Foraproducttoreachmarket,itisnotaboutmakingonenearperfectdemonstrator,itisaboutmakingmillionsreliablyandwithhighyield.Peoplewhohavedoneitbeforeareinvaluable.ItakeasharpintakeofbreathifIhearthatastart-upconsistsof9PhD’sand1nonPhD.Youshouldalsomakesureyourteamconsistsofamixtureofinnovatorsandfinishers,commercialisingtechnologyisnotjustabouttheideas,itisalsoaboutprecisionexecution,ifyou’reextremelyfortunateyou’llhavesomepeoplewhoareabletodoboth.Finallythereneedstobeacommercialandfinancialbalancetoyourteam,unfortunatelymanytechnologistsfeeltheydonotneedthesepeople...yet.Buttheyarewrong.Youneedspecialistsintheseareastoprovidebalanceandensureyourplansarereasonable.

“A classic mistake is to assume your technology is the centre of the world.”Thisleadsmetomynexttheme–itisreallyimportanttoanalysetherealvalueofyourtechnologyandthemarketopportunityproperly,don’tjustfitthetechnologytothe“best”market,buttrytoanalysewhataretheapplicationfundamentals,whataretherealtrends,whotherealstakeholdersareandwhy.Aclassicmistakeistoassumeyourtechnologyisthecentreoftheworld.Youneedtounderstandwhatroleitplays,whatthealternativeis(oftentheincumbentsolution)andmostimportantly,whatthingsyoucandotoenhanceyourvalue.Sometimesyouneedtotakeastepbackandbecriticalofyourownsolution.Don’tjustlookatwhataspectsitimproves,butlookatwhatareitsweaknesses,orwhatmightchangetoenhanceorweakenyourposition.

Thereisanaturaltendencytobeblinkeredbyyourowntechnologyandyourownexperiencesofthealternativeapproaches,youneedtobalanceyourenthusiasmforyourapproach,rememberyourcompetitorsandcustomersarecapablepeopletoo,andthebesttechnologydoesnotalwayswiniftheotherfactors–commercial,manufacturabilityandstrategic–arenotsatisfied.Customerswillnoteasilybackthemselvesintousinga“proprietary”solutionifthereisnotasufficientdifferenceinprice/performance,astheygenerallyhavemoretogainfromamultiplesourcestrategy.Thiscanbefrustrating,butthisisthereality,andyoumayneedtoconsiderasecondsourceorlicencestrategytoeventuallyaddressthisconcernandensurethereisabigenoughmarket.

Justasitisimportanttoreleaseyourtechnologyfortherightreasons,totherightpartners,attherighttime,youalsoneedtobecarefulaboutdevelopingNIH(Not

Jed is CTO and VP Engineering of Gigle

Semiconductor, a semiconductor company

creating high performance system-on-chip

integrated circuits for home networking

applications. Founded in 2005, Gigle has

centrally-located offices in Edinburgh

and Barcelona, with plans to establish a

worldwide presence.

InventedHere)syndrome.Ifitisnecessarytoadoptanotherapproachyoushouldbebraveenoughtodoit.

Anothertoughdecisionwhenbuildingatechnologycompanyistotrynottokilltodayfortomorrow,ORtomorrowfortoday.Ingeneral,youwillstartasanR&Dcentricorganisation,andthenwhenyougetthefirstmarkettractionyouwillmoveintoamodewhereyoutrytomaximisethereturnfromthefirstgenerationofyourproduct,butpleaseensurethatyouarealreadyplanningtodesignitoutwithyoursecondgeneration.Ifthemarketisbigenough,andyoudon’tdesignyourselfout,somebodyelsewill.

“Although you need to make sure your plans are aggressive; they must also be realistic and achievable.”Althoughyouneedtomakesureyourplansareaggressive;theymustalsoberealisticandachievable.Youwillbejudgedbyyourinvestorsandyourcustomersonyourexecution–thetoughestthingtodoistodeliveraprojectontime,inbudgetandtothecustomer’srequirements.Ifyourplansaretoooptimisticorhavetoomuchfat,theywillnotbeachievableorsurvivediligence.Therearethreethingstowatchoutfor:

•Beingtoooptimisticaboutthetimetobuildyourteam,andtheoverheadsofgettingthemfunctionalandperforming.Includemilestonesthataremeasurableandthatde-risktheproject,butalsomotivatetheteam,andprovideevidenceofprogresstotheoutsideworld.•Nothavingsufficienttimetovalidateorstabilisetheproductbeforelaunchingittomanycustomers,willcauseyouproblemsandmaydamageyourreputation–thatwilltakemuchmoreefforttorecover.Soitisbesttorestricttheearlycustomerstotheminimumstrategicneeded,andthosewhoarealreadyfamiliarwiththetechnologyorarestakeholderssomehowinthetechnology.•Relyingonthehockeysticksalescurves.Itisineveryone’splans,butIhaveneverseenitactuallyhappen.Customersdon’talwaysmoveatthepaceyouwant,andoftenthereareseasonaleffectstothemarketsorcustomerdesigncyclesthatyouneedtorespect.Makesureyouknowwhatyourcontingencyplansare.Ifonemonthkillsyou,itisnotagoodplan.

Finally,I’lltouchonthequestionoffinance,togetfinancingtherearefourelementsyourproposalmusthave:

•Thereneedstobeasignificantmarket,andthatmarketshouldbegrowingratherthandeclining.•Thereneedstobesomethinguniqueaboutyourofferingthatcanbeturnedintosomethingsustainable,andcanbemappedintothefundamentalneedsofthetargetmarkets.•Thereneedstobegoodpeopleintheorganisation,bothtechnicalandmanagement,ideallywithtrackrecordsofsuccess.•Thereneedstobeaplanforaproductthatthemarketwantsthatis‘justmadenough’–ifitistooeasyyouwillnotbeabletoanswerthequestionofwhycan’tthecompetitiondoit,ifitistoodifficultyouwillnotbeabletojustifythatyoucandoit.

Eventhen,therearemanyotherhurdlestocross.Youwillbefundedtokeepyouleanandmeanuntilyouprovethatyoucanmanagethemoneyandtheprojectsuccessfully.Makesurethatyoucommunicateeffectivelywithyourinvestors,andworkatmaximisingyourvaluewhilemanagingtheriskanditwillworkoutwell,andtheywillhavetoensurethattheymaximisethepotentialinthenextroundoffunding.

IhopethatbynowIhavenotdisillusionedyou.Ishouldhavestressedthatalthoughitishardworkandattimesverystressful,beingpartofatechnologystart-upishugelyrewarding.Yougettoattempttochangetheworld,tomaketheseeminglyimpossiblebecomepossible,yougettobuildateamandatechnologyfromscratch,andhopefullyyouwillgettheunexplainablepleasurefromseeingyour“baby”reachtheshelves(andgetsignificantfinancialreward).Icanvouchthatafter20yearsofbeinginvolvedinsilicontechnologies,andthelast12yearsofbeinginvolvedinstart-ups,itisstillfunandIthinkImadetherightdecision,allthattimeago.

23

Andy is a serial Biotechnology

entrepreneur and business angel.

He is currently a director of several

companies, including Cancer Research

Technology (commercial arm of CR-

UK), Babraham Bioscience Technology,

Aitua, Pharmakodex and is Chairman

of Altacor. Andy was a founder of

Chiroscience and an executive director

through to the merger with Celltech in

1999. Since then, he has been founding

and investing in new biotechnology

companies, including Arakis, Geneservice,

Cambridge Biotechnology Ltd, Amedis

Pharmaceuticals, Sirus Pharmaceuticals

and Daniolabs, all of which were

recently sold. He is also a director of the

Bioindustry Association (BIA), a founder

member of the Cambridge Angels, a

founder investor in Library House, and an

advisor to Toscana Life Sciences.

Dr Andy Richards

LettertoapotentialEntrepreneur–“ThingsIwishI’dknown…”(orsomeonehadbotheredtotellme!)

Euan,myson,IamwritingyouthisletterbecauseIbelievethatonedayyoucouldbeanentrepreneurandthatIthoughtyoumightforgivemyindulgencebypermittingmetotellyousomeofthethingsthatIwishIhadknownwhenIsetoutonmyjourneyintotheworldofbusiness.

Today,beinganentrepreneurisverytrendy,almostasfashionableasbeingacelebritychef.Itwasnotalwaysthisway,andIdaresaythatitsstatuswillchangeagaininthefuture,butfornowitis“in”andthereforedeeplyattractivetomany.However,despitethisnewfoundcacheandthefactthatanentireindustrythathasbeenbuiltitselfwiththeintentofteachingentrepreneurship,wearetoldthattherearestilltoofewgenuineentrepreneurs.

Quiteobviously,noteveryonecanbeanentrepreneur;infactitisaprivilegereserved(ordeserved)forthefewratherthanthemany.Ireallystruggletodeconstructtheessenceofthosethatmakeit.Mostattemptstodefine,catalogueorcharacteriseentrepreneursseemdoomedtofail.Certainly,ifIlookatmyowncircleofentrepreneurialfriendstheyareaprettyheterogeneousbunchwithsignificantlylessincommonthanmore.Soitisperhapseasiertodefinewhatdoesnotmakeanentrepreneurratherthantheconverse;anditisironicthatalmostanyonewhohasbeenonacourseandtriedtotraininentrepreneurshipismostlikelynottobeone!

Sowhattrainingandeducationdoentrepreneurshave?Well,sooftentheentrepreneurswhoareheldupbythemediaasrolemodelshave“trainedattheschooloflife”.Theyaredepictedas,andarecelebratedfor,beingtoughambitiousgeneralistscapableoftacklinganybusinessopportunity.Theysitintheirdragon’sdenandhireandfireonawhim.Butthesearerare(andoftenlessthanpleasant)beasts.ManyoftherealentrepreneursthatIrespectmosthavebuiltupdeepexpertise,aspecialismandacorecompetencetobuildon.Soyoucanbeanexpertandanentrepreneurandinmanywaysthisisafarbetterecologicalnichetobein.Theseentrepreneursaremorecomfortablewiththemselvesandmorepleasanttobearound.Soifyoucanbearit,bepatientandbecomeanexpertinasubject,askill,acapabilityavaluechainorasectorbeforeyouembarkonyourjourney.

Icanseesomanycharacteristicsandqualitiesinyouthatweseemtoshare;youtakerisks,yourthinkingisquirky,manyfindyoucharismaticandothersthreatening;youarefullofenergyandhavealoveofthenewandapassiontoachievewithinyourratherperverseviewoftheworld.YouvaluemostwhatyoucansucceedinandIknowyouarehungrytogetstarted.Butdon’tbeovereagerandgetsuckedintothewrongopportunityandthewrongjourney.Here“wrong”ismorelikelytobeaboutthewrongpeopleorthewrongtimingratherthansomedrybusinessfallacies.Rememberaboveallelsethatsuccessisthejourneyandnotaboutreachingthedestination–soenjoythejourney.

Ihadtolearn(andinmanywayslearnlate)thatIhadtremendousstrengthsandequallysignificantweaknesses,andittookmealongtimetolearnenoughaboutmyselfandhowothersreacttome.Isuspectthatforyou,likeme,ideasarecheap,sodon’twaitforthatonegreatidea.Findgoodideasandtestthemonothersandgaugehowtheyreact.Letthatbethemeasureofwhatyoutrytoexecute,andwhenyouexecuteitandmostimportantly,whoyoudecidetoexecuteitwith.Buildingbusinessisallaboutthepeople-theyaretherawingredientsthatmakethemaincourse,nottheideaortheplan,soaswellasunderstandingyourselfyouhavetounderstandthemandgatheraroundyouthosethatyoulikeandtrustbuthavedifferentandcomplementaryqualities.Everyoneisnotlikeyou….andthankgoodness!Youhavetolearnhowtheytick;howtheyaremotivatedandhowtoalignyourinterestswiththeirs.Evenwhendealingwithbigcompaniesrememberthatbehaviourismoretodowiththemotivationoftheindividualswithinthanoftenwhatmakesbestsenseforthecompanyasawhole.

Understandothers,butmorethananything,learnaboutyourselfandhowyouinteractwithothers.Learnhowyousell–andthentrytounderstandhowyouleadandhowyoumotivate.Thefirstoftheseisthesimplestandprobablytheonethatmostentrepreneurs

learnfirst.Ithinkallentrepreneurshavelearnedhowtosellormoreproperlyhowtheysellbest,andeveryonedoesthisdifferently!Youhavetotrustyourinstinctsanddoityourway-don’tgetdrawninbythestereotypesandtheself-helpbooksandthecourses.

Thebigsellisthenapplyingthisandsellingyourdream/visiontothoseyouwanttoworkwithyouandjoinyouonthejourney;themotivatingandtheleading.Ihavealwaysbeentootrustingandthishasbeenbothastrengthandaweakness.Otherswillletyoudownbutdon’tlookbackwards;thereisnopointincultivatingenemies,revengeissimplyadishbestneverservedatall.Contrarytothemediastereotype,youdonothavetobeabastardtosucceedandclawingoverthebodiesofyourcolleaguestogettheretendstodetractfromthejourney!

ThereissomethingveryDarwinianaboutfastgrowthbusinesses,theyevolveundertremendousselectionpressuresand,ofcourse,evolutionisnotaboutsurvivalofthefittest,butmoreaccurately,survivalofthosemostadaptabletothechangingenvironment.Thebusinessenvironmentisallaboutchange.Trueentrepreneurshavearealfeelandsenseforchangesintheenvironmentandtheyrespondearly.Theyareatthefrontofthewaveandgettheirtimingright.Beingluckyisoftensynonymouswithgettingonestimingright.Businesshasitsfadsanditsfashions,especiallywithintheinvestmentworld.Insomanywaysweareallsheep,andweacceptbusinesstheoryorstrategicdogmasthatspreadwidelybutwithhindsightareclearlyflawed–lookoutforthese,buthesitatetoshoutthefallacyfromtherooftops.Thebusinessworldlovesitsdogma’sandsoyouwillhaveto“talkthetalk”andgivelipservicetothecurrentbusinessaxiomstobeanacceptedmemberofthetribe.Butknowthatwhenbusinessseemscertain,changeisusuallyunderway.

YouandIlovetoexperiencethenewandthismakesushyper-sensitivetonewideasandconcepts.Weseetheseearlyandoftenthinkthempasséwhentheyarestillyoung.Manysaythatsuccessinbusinessisaboutluckbutmorethananythingitisabouttiming.Ideasarerarelygoodorbadbuttimelyandthetimelyideaisoneworthactingupon.

Perhapsthemostperplexingthingaboutsuccessfulentrepreneursisthataswellaslikingchangetheyhaveadoggeddeterminationandperseverancetoseethingsthrough;theyarenotquitterswhentimesaretough.However,becauseofthisthebiggestdangerisoftenoverstayingyourwelcomewhenthingsaregoingwell;rememberthatsuccessisthejourneyandmovingon,or“exit”asitistermed,ispartofthejourneyandtoberelished.Allbusinesstheorygoesonaboutexits,butforyoutherealexitrouteismoreimportantthanforanyoneelse.Itreallyisworthplanningforandnotworthworryingoverlossofcontrol,orpurpose,orstatusoridentity;orworryingaboutlettingotherstakeonwhatyouhavestarted.Gettingyourtimingrightby“gettingout”isevenmorecriticalthanyourtimingongettingin.Exitisagloriouspartofthejourneyandalmostalwaysthestartofanewone.

Enjoythejourneyandwhateveryoudodon’ttaketheadviceof[pompousoldfarts]tooseriously.

Love,

Dad

25

Wekeptourcomposureonthelift,throughthefoyer,andoutofthelawyers’officesonawetOctobernight.Then,coastclear,wethreeco-foundersturnedtoeachotherwithawhoop,ateamhigh-five.Thenextobjective-findaplacetoopenthewarmbottleofchampagnewehadluggedaroundformonths,waitingforthisday.Wehadjustsignedthelastdocumenttoget£5,000,000inthebanktofundourfledglingcompanyanditseemedthattheworldwasouroyster.

Itwasmyfirstmaterialstart-upandwethoughtwe’ddonemuchofthehardwork–monthsofbootstrappingoncreditcards,officespacewithweek-to-weektermsthekeyattribute,cold-callingthroughthephonebooktogetthatfirstcustomer,ridiculouspizzasessionstofindauniquename,endlesspitcheswithVCs,angelsandtargetedkeyemployees…thewholelot.Withmoneyinthebankandbigmomentum,fromhereonitwouldbesimple…orsowethought.Ofcourse,thevoyagehadjustbegun.

Wewerenaïveatthetimeaboutthechallengesahead,butinhindsight,celebratingachievementofkeymilestonesislikeahitoftheentrepreneurialismdrug,andthosehighmomentsthatmakeupforsometoughslogginginthemiddle.

BelowIhavesomewhatunscientificallyidentifiedwhatarehopefullysomenuggetsofhard-earnedwisdomtohelpmakethesloggingpartalittleeasier.

“The importance of alignment among the core team is hard to overstate.”Co-founding is like a trust fall

Today,asaninvestor,Isometimesseeteamswhoarenotinsynch,notseekingthesamegoals,andwhoareobviousaboutit.Theimportanceofalignmentamongthecoreteamishardtooverstate.Itisoktodisagreeattimes,butformajormatters,disagreementshouldbedoneinprivateandconstructively–withanagreedclearconsensusuntilthenextcloseddoorsessionrevisitingthestrategy.It’slikeaplayinsports–evenifsomebelieveadifferentplayshouldbecalled,whenyouareonthefield,youexecutetheagreedplay.Thisservesmultipleends.First,itmeansthattheteamiscomfortabledividingresourcestogetthingsdone,knowingthattheirinterestsareservedacrosstheboard.Second,itensuresthatthebroaderstaffisnotdistractedbyinternalsplitsandisfocusedonexecution.Finally,youbecomeyourownsupportgroupandinsuchanenvironmentyoucanobjectivelyseektherightanswers.Wehadamantraonourfoundingteam,“Bemorehonestwithoneanotherthanwewerewithourselves”,atellingcommentwhichgotusthroughsometoughdecisions,boldmoves,andgreattimes.

“The attitude and mood of the entrepreneur has a startlingly impressive impact on your organisation.”Keep your head up

Theattitudeandmoodoftheentrepreneurhasastartlinglyimpressiveimpactonyourorganisation.Thatmeansstaffaremorelikelytowhistlewhiletheyworkifyouarebeamingor,conversely,quietlybrowsejobwebsitesifyoustormmoodilyoutofaboardmeeting.

Communication and people, people and communication

Ibelievethatiftwopartiescomeuponthesameconcept,onebrilliantbutunabletoharnesstheenergy,imaginationandcapitalofothers,andasecondlessbrilliant,butaneffectivecommunicatorandmanagerofpeople,thesecondwilleventuallywinoutthroughsheerscale.Itisinpartforthatreasonyouoftenhearinvestorssaythattheyinvestinamanagementteam,notaproject.Idonotmeantoimplythattheconceptitselfisnotimportant–inacompetitivemarket,itisveryimportant.Butitisthebeginning.Heck,sometimesit’seventhemiddle.

Buildingacoreteamofpeoplewhoworktogetherwellandcommunicateclearlyiscriticaltogetinitialfinancing-theliftunderaconcept’swings.Afteraprojectgetsofftheground,hiringcapablepeople,whichintheearlystageinevitablymeansgettingtheirbuy-intothevision,keepingclearcommunicationoftheobjectivesofthecompany–changeastheymight–isthejetpower.

Alex co-founded GoIndustry plc, bringing

it from the product development stage

through to its current state as a publicly-

listed global company. Alex brings

analytical, restructuring, finance and

business development experience from

McKinsey & Co. and Disney, having

worked in the UK, Germany, US, and

Latin America. Alex received his BA from

Stanford and MBA from Harvard and is

a trustee with The Venture Partnership

Foundation. Since leaving GoIndustry in

2006, Alex is working on a variety of web-

related and clean tech projects.

Alex Hoye

26

Thebiggerthecompanygrows,themoreimportantitistostructurallyensurethateveryonefromtoptobottomisawareofandsharesthecoreobjectivesofthecompany–andIdon’tmeanWal-martsize,Imeanthatthecommunicationneedsaremorethan10xwhenyougrowfrom5to50!

You can’t focus ahead constantly looking over your shoulder

Wespentimmenseamountsoftimeworryingaboutthehundredsofmillionsofpoundsininvestmentthatourcompetitorswereraisingandwhattheyweredoing.Marketintelligenceiscriticalforanybusinesstobeeffective.However,welearnedovertimethatitismoreimportanttohaveacohesivestrategyandexecuteitwellthantodebateeverytacticalmovethatourcompetitorsdid.

Inafast-movingbusiness,youcouldeasilyspendallofyourtimebeingreactive,butitgetsinthewayofmovingyourbusinessforward.Someofthekeydecisionswemadebuckedindustrytrends,andafteroverabilliondollarswaspouredintodozensofstart-upsinourmarketspace,threeyearslatertherewerefewerthanahandfulleftandweweretheonlyonestoIPO–preciselybecausewedidafewthingsdifferentlythantheothers.Humanshaveaherdmentalityhard-wiredintous,andoneofthecoretenetsofsuccessfulbusinessesisrealisingintimewhentheherdismovingoffacliff.Youcanonlydothisifyoukeeptoyourowncompass.Ofcourse,itisalsoimportanttoensurethatyourowncompassisnotdrivingyouoffanevenbiggercliff,butthat’sanothermatter.

Simplicity wins

Everybrainstormingsessioncomesupwithadozenservices,features,widgets,optionstoaddtoaproductorpartnershipstochase.Inevitablyonlyafewreallymattertothecustomerandeachdetractsexponentiallyfromtheabilitytodeliver.Focus,focus,focus.

Caveat Emptor

Stakeholderswillactaccordingtotheirinterestsinapinch,it’snotmeanorunfair,butitisreality.Everyoneisfriendlygoingintoadeal,contractorfinancing,butthinkhardaboutthepotentialdownsidescenariosbeforeyousignacontractandthinkaboutwhatanadvisor’sstakeisbeforefilteringwhatyoudowiththeadvice.

Fund-raising is massively disruptive

Financeislifeblood,butitishelpfultorealiseforplanningpurposesthatfundraisingisamassivelydisruptiveprocess.Nearlyeveryoneinthebusinesswillbeaffectedbeitforfactsanddocumentation,pullingtogetherclientandsupplierdetails,HRrecords,andmostobviouslyanythinglegalorfinancial.Wefoundtwoimportantfacts–first,thatwehadaclearoperatingplansothatthebusinesscouldchugaheadasusualwhenmostofmanagementwasdistractedpullinginformationtogetherfortheprocess.Second,knowingwhatmostofthecorequestionsare–andtheydonotdifferdramaticallybetweenSeriesBtoIPO,theyjusthavemoreandmoreexpensivepeoplesigningthemoff–wekeptasmuchofitaspossibleloggedandtrackedaswewentalongbetweenfinancings.

Necessary evil

Good–andreasonablypriced–legalcounselisanecessaryevil.Strivetogetcounselwithsensibleviewsonoutstandingpaymentswhencashflowisvariable,andoneswhodon’ttrytowincontractclausebattlesattheexpenseoflosingdealwars.

“Business is a serious thing, but people work harder and better together when it’s fun.”Have fun!

Businessisaseriousthing,butpeopleworkharderandbettertogetherwhenit’sfun–otherwise,we’dalljustbebankers…

Thoseareafewthoughts,buttherearemorethanonecanrecountandthebestwaytofindmoreistolivetheexperience.Mostofall,IwishIhadknownhowgratifyingitistolookatateam,abusiness,anindustrychangecatalysedbymyinvolvement.Itisimpossibletogobacktoa‘dayjob’afterhavingdoneso.

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Ernie Richardson is CEO of MTI,

an investor in young technology

businesses in the UK and USA.

MTI’s overriding motivation for

investment is a company’s potential

for commercial success, determined

by the quality of its technology,

potential market, and the calibre of its

management. Ernie is a director of a

number of technology companies in

which MTI has invested.

Ernie Richardson

So,you’vedecidedtogoforit.Despiteallmyscepticismyou’regoingtostartupyourtechnologycompanyandgiveup(oratleastputonhold)youracademiccareer.IhavetosaythatItakethisnewswithamixtureofenormousadmirationanddeepforeboding,butsinceyou’reintentongoingdownthisroute,canIsharewithyouafewthoughtsthatmighthelpoutwhenthegoinggetstough;asitwilldo!

“There needs to be something inside you that burns to do this, because when the going gets tough, it’s that sense of illogical ambition which will sustain you.” Entrepreneurialism is a profoundly illogical activity

Iwouldexpectyouasanacademictoappreciatethat.Inyourcaseitinvolvessuspendingapromisingacademiccareerinfavouroftremendoushardwork,nervoustension,strainonyourfinancesandyourpersonallifewith(statisticallyspeaking)arelativelypoorchanceofsuccess.However,ifthereisn’tanelementofillogicalityinwhatyou’redoingthenyou’reprobablyonthewrongpath.Thereneedstobesomethinginsideyouthat“burns”todothis,becausewhenthegoinggetstough,it’sthatsenseofillogicalambitionwhichwillsustainyou.

Success has many fathers and failure is an orphan

Aftertheinitialeuphoria,yourprojectwillmeetdeepandingrainedscepticism,particularlyintheUK.Thepeopleinlargecorporates(whowillultimatelybuyyourproduct/business)willgothroughanumberofphases:

•Firstlyignoreyouridea,ordismissitastrivial(“wecoulddothatanytimewewished”)•Thenattackit(“itwon’twork;tooexpensive;threatensourinstalledcustomerbase”)etc.•Thengrudginglyadoptit,butonlywheretheyhavenoalternative•Finally,whenyourrouteisself-evidentlythewaytogo,absorbit(“wealwaysknewthat…”)

Howeverintheeventthatfirsttimerounditdoesfail,thentherewillbeatorrentof“wetoldyouso…”Nobodywillthankyouforprovingthemwrong.Rathertheacknowledgementthatyouwererightappearsinthesizeofthebusinessyoubuild.

It’s better to be rich than right

Oneoftheattitudesthatafflicttheacademiclifeistheneedtobeprovedright.Incontrastinthebusinessworld,decisionsaremadeonamuchlessrigorousbasis.Forexample,theworldoftechnologyispopulatedbysecondclassproductsthatdominatemarkets–WindowsOSvsOpenSource;PCvsMac,etc.etc.Thepointhereisthatinanymarketthereisapointwherethequalityofthetechnology(beingright)isnolongerthedeterminingfactorinitsadoption–atthispointalltheblackartsofsalesandmarketingcomeintoplay.Technologyhastobegoodenough,butfairlysoonissueslikeprice,easeofuse,marketaccesstotheproductbecomemuchmoreimportantthantheunderlyingtechnology.Twoimportantmattersfollowfromthis:

•Firstly,themarketdecidesonwhatisimportantandwhatisn’t,notyouoryourdevelopmentteam.ThethingthatMicrosofthavealwaysexcelledatisgettingproductintothehandsofusersquickly,listentowhattheyhavetosayandthenincorporateit;evenifitcutsacrosstheviewofthe“beauty”ofyourproduct.ThisiswhyvirtuallyallMicrosoftproductshavetogothroughseveralversionsbeforetheyareanygood.•Secondly,alwaysgoforgrowth.Again,themarketwilldecidethevalue(price)attributabletoyourproduct,notyou.Sothechallengeistocaptureusers,listentothemandthendrivecostoutofyourproduct(andyourbusiness)suchthatitbecomeswidelyadopted.

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“The voyage that you’ve embarked on with your project is new; nobody has ever been there before.”Experience is valuable, but not invaluable

Thevoyagethatyou’veembarkedonwithyourprojectisnew;nobodyhaseverbeentherebefore.Suresomepeoplehaveundertakensimilarjourneysandsomepeoplehavebeentoplaces(markets)thatarelikeyours.But,nobodyhasevertakenyourjourneytoyourdestination.Thisiswhytheadvicetheycanofferandexperiencetheycanbring(includingmine!)hasvaluebutnobodycantellyouexactlywhattodo.Iftheycanthenyou’reonthewrongjourneyandyoushouldstopandfindyourownjourney,becausemost(ifnotall)ofthevaluehasalreadybeenextracted.

Oneofthestereotypical(andflawed)assumptionsamongstpeoplewhooperateintheareaoftechnologyentrepreneursisthatfoundersareOKuptoapointbutthenthe“grownups”shouldtakeover.Insomecircumstancesthismayberight,butgenerallywhenthegoinggetstough,it’sthefounderswhowillhangoninthere.Hiredhandscomeandgo.However,thekeyisthatthedecisiontohandoveranydegreeofcontroltoanincomingmanagershouldbeyoursandshouldbedoneonthebasisofdemonstrableaddedvalue.Ifyouendupfailing,itmightaswellbeforyourmistakesratherthanforthemistakesofsomeoneyoubroughtintothebusiness.

Learn how to sell

Probablythemostfrequentmistakemadeintechnologystart-upsistooverestimatethevalueoftheunderlyingtechnology.Ingeneraltermsthecontributionmadetoanysuccessfulbusinessbyitscoretechnologyisprobablynomorethan10-15%.Whatreallydoesaddvalueistheapplicationofthattechnologyinthehandsofusersfacingrealbusinessissues.Thereafterit’sallaboutsalesandmarketing,andthisisprobablythemostimportantcontributoryelement.

Anotherstereotypical(andflawed)assumptionamongstacademicentrepreneursisthatsalesandmarketingissomehowasecondrateactivityandthatacademicentrepreneursmakepoorsalespeople.Thisisdrivenbythe“footinthedoor”,slicksalesmanpicturethatmanyacademicentrepreneursstillcarry.Infact,mostbusinessesstartedupbyacademicsarebusinesstobusiness,highaddedvalueoperationswherethepersondoingthesellinghastoknowasmuchaboutthetechnologyashiscustomer;whoisprobablyahighlyqualifiedtechnologist.Inthissituationthesalesprocesslendsitselftosimilarlyqualifiedsalesandmarketingpersonnel.Finallygoodsalesandmarketingpeopleareverywellorganisedandarefollowingasystematicsalesprocesswhichanyacademiccanrecogniseandquicklyadopt.

Soenoughofthesagewords.Attheendofthedayyou’veembarkedonthisjourneybecausesomewheredeepdownyouhaveto!Iapplaudthatandevenifitdoesn’tworkout,duringthisprocessyouwilldiscovermoreaboutyourselfandaboutbusinessthananynumberofMBAprogrammes.GoodluckandmakesuretosendmeaninvitetotheIPOparty.

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Ian Underwood

OnMay7th1959,C.P.SnowdeliveredtheRedeLectureentitled“The Two Cultures” inCambridge,England.Histhesiswasthatathereexistedagap(orevenachasm)betweentwoofthedistinctculturesofsociety–thoseofthesciencesandthehumanities-aconsequenceofwhichwasabreakdownincommunication.Theendresultwasasignificantbarriertosolvingtheworld’sproblems.But,thisarticleisnotaboutthesolvingtheworld’sproblems–onlyaboutsolvingthecompany’sproblems.

By1997IwasamoderatelysuccessfulacademicinaverygooddepartmentinaverygooduniversityintheUKwithlittlerecentexperienceoutsideofuniversityresearch.Twoyearsfurtheron,in1999,Iwastheco-founderofahigh-techspin-outcompanypresentingitselfasadeveloperofinnovativeproductsbaseduponnewtechnology.InthecourseofsecuringseveralroundsofVCfundingoverseveralyears,thecompanyhadconsideredbusinessplansbasedonlicensing,partneringandstand-alonemanufacturing,finallysettling(correctly,inmyopinion)onthelast.Thecompanyhascomealongwayfromitsconceptioninthemindsoftwouniversityresearchers.ThroughaphaseasanorganisationfocusedondevelopmentemployingprimarilyPhDsitistodayamaturingorganisationmanufacturingproductsandemployingmorethan50staffinseveralcountries.

Despitemyownpersonalculturalbaggage,theonethingIknewintheearlydaysofthecompanywasthattheteamwehaddidn’t know it all.Ifthecompanywasgoingtofulfilitspotential,alongsidedevelopingitsearlystaff,itwouldhavetohireinmuchofwhatitdidn’thave.Tofocusonaspecificexample,intheearlydayswewere-likemanyuniversitytechnologyspin-outs-acompanywithalargestaffofresearchscientistsinwhichno-onehaddirectexperienceofvolumemanufacturing.Andwewouldneedatsomepoint–andthesoonerthebetter–toimportsomeofthatmanufacturingexperience.

Now,scientistsarebyinclinationprimarilymotivatedto,anddrivento,understandhowandwhythingswork.Whilethisisnearlyalwaysbeneficialinthelongterm,itcanresultintheperceptionthattheyarenotfocusedonsolvingurgentproblemswiththenecessaryexpediency.Scientistsarenecessarytothelong-termbenefitofthecompanyastheyarethedevelopersofnewtechnologyandproductsonwhichthecompany’sfuturerevenueswilldepend.Thetoolsetofthescientistincludestechniquessuchasanalyticalmodelling,computersimulationanddesignedexperimentation.

Incontrast,manufacturingstaffarebydefinitionmotivatedanddriventomanufactureandshipproduct.Theywanttokeepthingsmoving.Theywanttosolveproblemsasquicklyaspossible.Whilethisisnearlyalwaysbeneficialintheshortterm,itcansometimesresultinshorttermfixesoracombinationofsequentialfixesthat,bysteppingbackandpondering,havethepotentialtobeimprovedupon.Manufacturingstaffarenecessarytotheshorttermbenefitofthecompanyastheyprovidetheoutputonwhichthecompany’srevenuesdepend.Thetoolsetofmanufacturingincludesstatisticalanalysisofhistoricalandrecentproductiondataand,sometimes,theopportunitytodesignandrunprocesssplits.

Inthecaseofatechnologyspin-outcompanythechasm,betweentheculturesofscienceandmanufacturing,canbeamplifiedasthetwoculturesareoftenfurtherseparatedbyhistoricalenvironment–theincumbentscientistsfromPhDandpost-doctoralresearchstudyinuniversitiesandtheincomingmanufacturersfrommatureindustry(suchasaCMOSwaferfoundry)-andbotharestrugglingtocometotermswiththeneartotallackofinfrastructureandsupportinthestart-upenvironment.Otherpossibilitiesincludeverticalchasmsofculturesuchasthosebetween“directorsandemployees”or“managementandtheshopfloor”,orhorizontalchasmsofculturessuchasthosebetween“MarketingandEngineering”,ormyownpersonalfavourite-“FinanceandSales”.

Inthiscontext,the“thing I wish I’d known”isjusthowwidethegapbetweenthesetwoculturescanbeandjusthowsignificanttheconsequencesofanygapcanbe.Andthereforejusthowworthwhileandimportantistheearlyinvestmentoftimeandeffortintoensuringthatthetwoculturesquicklycometosetasidemutualsuspicion,appreciateoneanother’sworth,learnoneanother’slanguage,understandoneanother’sstrengthsandweaknessesandlearntoworkeffectivelytogetherforthecommongood.

Ian is a co-founder and currently CTO of MicroEmissive Displays (MED) and co-inventor of its P-OLED microdisplay technology. He has been a fellow at several prestigious bodies, a Photonics Spectra Circle of Excellence designer, a Ben Sturgeon Award winner, Ernst & Young’s Emerging Entrepreneur of the Year, and, as Gannochy Medal winner, recognised as Scotland’s Top Innovator. He was listed by the Herald newspaper in 2006 among the “twenty Scottish scientists changing the world we live in”, but is most proud of MED’s Guinness World Record for producing “the world’s smallest colour TV screen”.

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Sir Robin Saxby

Itwouldbepossibletofillavolumewithallthethingsyoushouldandshouldn’tdowhenyoustartabusiness,butthesearejustafewofthethingsthathaveservedmewell…

“A team is only as strong as the weakest link.” Skills

Noonepersonknowsitall,sowhereyoudon’thaverealbusinessexperienceinsales,marketing,communication,HR,legal,globalawarenessorfinance,makesureyouhavepeoplewiththeskillsessentialforyourteam.Ifyoucan’taffordtohirefull-timepeople,usethebestpart-timeadvisorsuntilyoucanaffordthem.Andremember,ateamisonlyasstrongastheweakestlink.Soidentifytherealstrengthsandweaknessesofeveryteammembertoensurealltheessentialskillsetsarecovered,andthenplaytothestrengthsandopportunitiesyoudiscover.Butdon’tforgettocorrectweaknessesandminimisethethreats.

“Mistakes will happen; learn from them.”Plans and operations

Businessplansarenotjustaboutraisingfinance.Youneedtobuildoperational(shortterm),tactical(mediumterm)andstrategic(longerterm)plans,andthencontinuouslycheckyourprogressagainstyourplans,andasyougathermoreexperienceanddata,changeandimproveyourplans.Doanassessmentagainstallglobalcompetitionthatyoucanfindoutabout.Readandinquire.Haveabaselineplan,afall-backplanandanupsidebusinessplan,tohelpwithemployeeheadcountplanningandcostcontrol.Thiswayyoucanbepreparedforwhetherthingsgoreallywell,orreallybadly!

Runthebusiness“meanandlean”andincentiviseyouremployeestocontrolcosttoo,butdon’tforgettoalsorewardthemforlong-termsuccess.Mistakeswillhappen;learnfromthem.

Telling it as it is

Alwaysunder-promiseandover-deliver;berealisticandhonestaboutyourproductandyourcapabilities.Besensibleabouttimescales,butsetchallengingandstretchinggoals.ItisnevertooearlytoevolveaglobalPRandmarketingstrategy.Butkeepthecommunicationsimple;charts,picturesandgraphsspeakathousandwords.

“Hard work and fun are essential ingredients of success.”Getting the thinking right

Hardworkandfunareessentialingredientsofsuccess.Businessis10%inspiration,90%perspiration.Ifyou’renotpreparedtoworklonghoursandabletorecoverquicklyfromafall,don’tgetstarted.

Bereallydrivenbyhowyourdevice,product,ideacanchangetheworld;passioncountsmorethananyideato“makeafastbuck”.

Rememberbusinessismuchmoreaboutcustomer-pullthantechnology-push,sotalktootherswhohavedoneitbeforeandseektheirhelp.

Finally,thinkbeyondthepossibleandbackofftoreality.

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Adrian is Co-Founder and Director of AlertMe, a home security technology company, and is responsible for overseeing the commercial development of the company, helping to communicate and establish the brand, and build business partnerships. Adrian has founded several successful companies, including ActiveHotels.com, Europe’s No.1 online hotel reservation system, which became the fastest growing company in the UK in 2003 before being sold a year later for £90 million, delivering a 16 fold return to investors. Adrian recently founded Sawston Hall, a 16th century hotel located near Cambridge, which is being converted into Europe’s first carbon neutral hotel.

Adrian Critchlow

WhenIsetoutinbusinessIwishIknew“pricingisanartnotascience”.Thereisnoblackorwhitewhenitcomestopricing.

Tosellanythingyouneedtohaveaprice.ThismaysoundobviousbutearlyonwhenIwasrunninganeducationalsoftwarecompanywehadthreeproducts,eachwithanindividualprice.Thenoneeducationauthorityaskedforalicensefor300schoolsitelicenses.IagonisedfordaysastowhatdiscountIshouldgive.Ireallywantedtogetitrightandindoingsonearlylostthesale!Withoutapricetheycouldn’tplacetheorderandIquicklydiscoveredthatthewrongpricewasbetterthannoprice–Theprobabilityofgettingtheorderwiththewrongpriceisalwaysgreaterthangettingitwithnoprice(i.e.probability=zero!).

Sowhyispricinganart?It’sanartbecausepricingisaboutperception.Doyouwanttobeperceivedtobe“fair”,“lowcost”(Ihatethewordcheap!),“luxury”;perhapsyouwanttobealittlebettervaluethanyourcompetitors,orperhapsyouwanttopriceabovethemsoyouareperceivedasa“better”moreexpensiveproduct,aswedidonce.Thereisobviouslysomesciencethatcanbeapplied.Youcanstartfromthebottomup‘costplus’,asit’sknown,andaddthemarginyouwantontoyourcostprice,oryoucanworkon‘marketpricing’andchooseapriceyoufeelthemarketwillbear;alternativelyasmostcompaniesendupdoing,youcanuseacombinationofthetwo.Butattheendofthedayitcomesdowntoproductpositioningandperception,whichencompassesmuchmorethanjusttheprice.

Itmayseemobviousthatyouneedapricetosellaproductbutinthiseraof24/7internetshoppingit’samazinghowmanyproductsarepromotedwithoutapriceora‘buy’button.About50%ofproductsIlookatontheinternetasaninterestedready-to-buy-consumerIendupnotpurchasingbecausetheywon’ttellmehowmuchtheycost.‘Callusforpricing’or‘seeyourdealer’alltoooftenresultinalostsale.Worsestillarecompaniesthatlinkyoutoaresellerwhohaszerostockandpointsyoutoacompetingproduct.Maybecompaniesareworriedaboutappearingtooexpensiveorbeingjudgedbytheirpricingbutattheendofthedayiftheyareproudoftheproducttheyshouldbehappytodisplaytheprice,the‘wrong’priceisstatisticallymorelikelytogetthesalethannopriceatall.

Withregardstothescience,Ionceranapricingexperimentwitha£39product.ItwasasoftwareCD,soithada95%+grossmargin,sowedirectmailedto1,000customersanofferpriceof£39;1,000morewereofferedat£29;1,000at£19;andfinally1,000at£9.95(eachofferspecifiedtheRRPas£39).Theresultswereveryinteresting.Witheverypricepointreductionitnearlydoubledthenumberofsaleshighlightingthatitisalwaysworthconsideringvolumeasakeyfactorinyourpricingdecisions!

Finally,thisexponentialrelationshipleadsmanycompaniesinthelow-promotion-cost-internet-worldtorealisethatinordertomaximisethesalesvolumesandtheviralwordofmouthpromotionopportunity,thebestpricepointis‘free’!(NoteapriceofzeroisobviouslynotthesameasNOTsittingonprice!).Thishoweveronlyworksifyourproducthasrealvalue,isperceivedasvaluableandyouquicklyfindawayofmonetisingitthroughadvertising,salesofdata-mininginformationorupgrade/addonsalesetc.Afterall,thefirstlawofentrepreneurshipstillapplies“CashisKing”andgettingyourpricingstrategyrightisakeypartofachievingit!

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Acknowledgements

ProductionofthisbookletwouldnothavebeenpossiblewithoutthefinancialandadministrativesupportoftheBVCAandNESTA.Wewouldalsoliketothankallthecontributorsandtheeditorsfortheirtime,effortandgenerosityofspirit;inparticularErnieRichardsonofMTIPartners,fororiginatingtheideaandthendelegatingallthehardworktoeverybodyelse.

BVCA

TheBVCA-TheBritishPrivateEquityandVentureCapitalAssociationistheindustrybodyfortheUKprivateequityandventurecapitalindustry.Ourmembershipofwellover400membersrepresentstheoverwhelmingnumberofUK-basedprivateequityandventurecapitalfirmsandtheiradvisers.TheBVCAhasover24yearsofexperiencerepresentingtheindustry,whichcurrentlyaccountsforaround60%ofthewholeEuropeanprivateequitymarket,togovernment,theEuropeanCommissionandParliament,themedia,regulatoryandotherstatutorybodiesathome,acrossEuropeandaroundtheworld.Wepromotetheindustrytoentrepreneursandinvestors,aswellasprovideservicesandbestpracticestandardstoourmembers.

Copyright

Thegreatestcarehasbeentakenincompilingthisdocument.However,noresponsibilitycanbeacceptedbythepublishersorcompilersfortheaccuracyoftheinformationpresented.Theopinionsexpressedarethoseoftheauthor’sandthesedonotnecessarilycoincidewiththeviewsoftheBVCAorNESTA.Anyinformationpresentedinthisdocumentmaybereproduced,buttheauthorsassertthemoralrighttobeidentifiedastheauthorsoftheirworkandanyreproductionsmustincludecompletedetailsoftheauthor,theBVCAandNESTA,fullysourcedandacknowledged.

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