Tactics for…turbulent times

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What turbulent times suggest for young ventures

I have been asking several expert mentors what advice they would give to early stage ventures in to-day’s turbulent times. Here is what they said:

  1. Expect customers and investors to delay decisions in the short term; but these things will take at least two years to sort out, so some kind of new norm will return to fill this gap.
  2. Cut development work that does not support the core competency of your business model.
  3. Get more from customers (and less from funders): don’t refrain from recruiting.
  4. Understand your revenue and expense streams and tailor the size of your organisation to a [cautious] estimate of future funds.
  5. Funding rounds are getting tighter and squeezing founders; and funders are requiring a good business case that includes ‘deeptech’ (IP), and not just break-even but also a handsome regular income from trading.
  6. You are entrepreneurs: look for new opportunities – in a slightly more conservative world.

John Whatmore, June 2016

A support programme for hi-growth young ventures

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A Growth Builder programme for hi-growth ventures

At last programmes are being initiated, based on the elements of the Accelerator but provided on a periodic basis, that fill a gap in aiming to help hi-growth businesses to grow faster. Every incubator should follow suit.

Sherry Coutu CBE, serial entrepreneur and investor, identified in her report of 2014 a need to support rapidly expanding ‘scale-up’ companies to create a significant proportion of the UK’s economic growth; RBS analysis suggested an additional 238,000 jobs and £38 billion additional turnover is possible if the ‘scale up gap’ is reversed; and the 2016 Barclays Report puts its finger on specific needs concerning management and finance.

The Growth Builder programme is one of several recent responses to her call for Government, entrepreneurs, educators, investors and large corporates to work together to support these businesses, and it has been built specifically to help established British businesses that want to take on the next stage of growth.

The first cohort consists of businesses from a range of sectors, carefully picked based on existing proven successes and their potential for further growth – by a panel of esteemed industry experts. The 48 businesses will enjoy access to Government, university innovation, corporate expertise, investors and successful entrepreneurs, including programme ambassadors like Brent Hoberman (lastminute.com, made.com, Founders Forum and Founders Factory), Sherry Coutu CBE (Founders4Schools), Sarah Wood (Unruly) and Ed Wray (Betfair), among others.

The programme which has been designed by UCL, Natwest, UKTI, BT, PIE Mapping, Fast Growth Forum, the UK Business Angels Association and Loughborough University, consists of 12 monthly meetings, starting with a day focused on getting to know one another and formal assessment of where each business is and where it hopes to go, based on the Business Model Canvas. The second meeting – a half-day meeting, will see the participants working in small groups, based on such things as size, sector, technology etc; at which the members of each group will present their progress together with their problems, to which group members will contribute their thoughts, their own experience and their ideas. Some mentoring is provided by ‘growth tutors’. Future meetings are expected to alternate between these two models – the provision of input and small group working. Meetings rotate around the premises of the various contributors.

This format brings together the best of a number of existing programmes, all of them evidently highly valued, and adds the intimate involvement of a wide variety of different contributors – provided pro bono. Every incubator can put together a programme with this objective (and every Science Park, Innovation Centre and Tech Hub too.)

John Whatmore, June 2016

 

 

A new programme from Stanford

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A programme from Stanford to support entrepreneurial venturing in organisations Designed to help technical leaders to enhance their entrepreneurship, this part-time programme in London includes a lot of work on their specific ventures

The Stanford Ignite London programme, about to start, is designed to deliver the same kind of immersive, innovative, and hands-on instruction that working professionals and graduate students at Stanford experience.

It provides exposure to both the fundamentals of management and the practical aspects of identifying, evaluating, and moving business ideas forward. It is aimed at participants with strong scientific, medical, or technical backgrounds who do not have an advanced degree in business.

Participants are taught by Stanford business faculty in London as well as those beamed in from Silicon Valley through high-definition video technology. Infosys which also hosted the Bangalore programme will host this programme at its Canary Wharf teleconference facility, using its high-definition distance video technology to deliver seamless teaching sessions from California to London.

During the programme, which runs from September to December, participants will engage with faculty and each other in interactive sessions and group projects. “This is a programme for those who are planning to start a new venture, as well as for intrapreneurs – individuals who wish to bring innovation and entrepreneurial thinking to their current role within a company,” said Stanford Ignite faculty director Yossi Feinberg, Professor of Economics at Stanford Graduate School of Business. “It provides graduate students, innovators, scientists, and engineers from leading companies the essential toolset for creating impactful ventures.”

Stanford Ignite participants have started more than 100 successful companies since the programme was introduced at Stanford in 2006. The London programme is one of seven Stanford Ignite programmes available in innovation hubs around the globe to enable audiences outside of Silicon Valley to tap into Stanford’s distinctive approach to teaching entrepreneurship and management. It is now offered in Bangalore, Beijing, Paris, New York, London, and Santiago as well as at Stanford.

The non-degree programme in London – for 50 participants – costs US$10,000 and will be held every other week on Friday evenings, Saturday and Sunday over a twelve week period. It will include training, but also a third of the time on participants’ own venture projects, which they will develop by working closely with experienced mentors and panels of industry experts from both Silicon Valley and the New York area – who will provide real-world feedback.

The programme draws on the same world-class business faculty who teach in Stanford’s MBA Programme, which is infused with the culture and practice of innovation that pervades Stanford University and Silicon Valley.

John Whatmore, June 2016

Putting early emphasis on the exit route

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Putting early emphasis on the exit route Trade sales make for good prices, but they take more work and more understanding of buyers’ businesses and their motives.

It may be no surprise that the prices paid by buyers of private businesses reflect what as buyers they can make out of the business rather than its book value.

Analysis of their work by BCMS, the largest seller in the UK of private businesses shows that by far the main reasons for acquiring a business is that it represents a new service, skill or technology, a new customer base, or a geographical expansion. Financial investment is very rarely the reason.

Moreover, buyers are rarely to be found among competitors and businesses in the same field; they tend to be from adjacent fields, and making unexpected synergies with the seller.

The nostrums that they offer are two: get competing buyers into the ring, and look at the value of your business in terms of what the buyer is likely to be able to make of it, rather than its historical value.

BCMS’s approach is to spend a substantial research effort in finding possible candidates – often up to a couple of hundred, and then sifting through them to arrive at a small number of serious contenders, before inviting bids. The lowest bids tend to be around a conventional multiple of profit, and the highest as much as two and a half times greater.

If these morsels of wisdom are applied to the field of early-stage businesses, you would be looking extensively and very early on in your business’s life at the fields in which your product or service can add value; and at how possible buyers in those fields have made use of such synergies in the past.

That means that you would be looking for a buyer who had some experience and understanding of the technology involved and the fields of its potential application rather than a financially based venture capital company. And you would be looking to meet several of them. And that probably means knowing the whole field.

Those who have the vision to see a new potential application for a young business’s product or service are those who will turn the price for it into an interesting multiple.

John Whatmore, June 2016

Scale-up Institute leads the way

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Scale-up Institute’s future focus and recent research

Just published research has aimed to identify the obstacles that confront young potentially hi-growth businesses. What clusters, LEPs, ‘accelerators’ and supply chains can contribute is now under the Institute’s microscope.

 At a meeting at Said Business School in Oxford to introduce a major report into Scale-ups and business growth, researchers from Said focused on recommendations about management skills; and the Judge Institute in Cambridge on recommendations in relation to financability – the two areas as closely linked.

While hi-growth SMEs generate 20% of all jobs growth in the UK, recent evidence from OECD shows that the UK has the lowest proportion of hi-growth SMEs: the biggest problem for the UK is not in starting companies, but in growing them.

Sherry Coutu, the founder of the Scale-up Institute focused first and foremost on the importance of leadership – eg by the founder, especially in relation to building a team. But she also underlined the need for more data – with which to guide policy and support for hi-growth ventures.

Work was also in hand, she said, to analyse the thirty or so clusters in the UK – those areas that contain quantities of similar businesses that have marked commonalities – and understand more about how they influence scaling up.

She also said that work was going on to rank the Local Enterprise Partnerships in terms of their support for growing ventures, and thus help them to enhance and adapt the support they offer them.

Work is also going on to detail the providers of programmes that support the development of young ventures – the ‘Seedcamps’ of scale-ups.

Finally, she drew attention to the need to get buyers (in corporates, institutions, public services etc) to make their supply chains amenable to young ventures, and thus support their scaling up.

Innovate UK needs to give the Scale-up Institute’s work immediate and continuing support.

John Whatmore, May 2016