New support for startups and scaleups in East London

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New support for startups and scaleups in East London
ENTIQ’s new innovation centre in the old Olympic Park will be a great new signpost but the peloton needs more than that: a new network is needed to spur incubators and co-working spaces to develop support services like this one –  for the growing number of young businesses.

ENTIQ is the innovation consultancy behind a new Innovation Centre on the new campus in the Queen Elizabeth Olympic Park in East London. Jointly owned with an investment fund, it will provide support services for business development for: new product development – with prototyping facilities and a technology lab, entrepreneurship and business education, business-accelerator and -growth programmes, and back office and professional support.

                                                          Focus on local threads 

The Innovation Centre’s aim is to establish a cluster of up to 500 members and organisations as at Tech City in Shoreditch; and the Centre will work with companies big and small that are pioneering new technology in their fields, with an initial focus on Sport, Health, Fashion, Smart Cities and the Internet of Things (IoT).

Typical targets include improving engagement in sport; tools for preventative healthcare; designing intelligent and functional fabrics; applications that improve connectivity; and sustainability and mobility in urban environments.

                                                 This will be a gee-whizz park

It is expected to be a place for experimentation, design and performance – for entrepreneurs and big businesses alike – a launchpad for British-based scale-ups and a ‘soft landing pad’ for companies coming to the UK for the first time.

With its base in London, it could make a much needed contribution to the development and commercialisation of UK technology. It will be a centre that is carefully tailored to early-stage businesses and in particular to those that are pioneering new technologies, and one that also has on hand high quality support, provided proactively.

                                      Scaleups badly need this kind of leadership

While the number of incubators and particularly co-working spaces in the UK has been growing substantially (there are probably now several thousand), few offer services to their occupants to this extent, yet they are possibly housing the unicorns of the future.

Many of these are run by individuals who have little hands-on experience of business or of business support agencies; and their links with the business community are often tenuous. ENTIQ however, was co-founded by two people who co-created Level39 – the innovation centre in Canary Wharf; and ran the Cognicity Programme for Canary Wharf Group, a 3D Fintech Lab for Dassault Systemes, and a Blockchain Lab project among other specialist innovation programmes. Claire Cockerton is a serial entrepreneur, and Eric van der Kleij had been the founding CEO of TechCity.

                                                        A very tough task

Making a success for early-stage businesses in all sorts of developing technologies in a Centre like this could well be as difficult a task as if all the students in a university were reading completely different subjects. It will require a remarkably sophisticated feat of collaborative support – to help all of the different businesses to develop and commercialise their products or services. Or else it may have a high failure rate.

With the rise in entrepreneurialism, support for startups and scaleups has got more sophisticated as Accelerators have proliferated and diversified; and Growth Builder programmes have come on the scene. With new developments in support evolving continually, there is an urgent need to help incubators and co-working spaces UK-wide to be able to offer them to their occupants.

UKBI (UK Business Incubator – the sector’s trade association) was founded some twenty years, but collapsed several years ago. The time is surely right for a new network of hothouses (incubators, co-working spaces and their ilk), that will help its members learn from one another and from outside experts about the latest practices and approaches for providing support to young businesses.

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Some comparable initiatives
This will be a larger project than the Daresbury Innovation Centre (http://wp.me/p3beJt-Y), launched several years ago in the vacuum left when the bid for the new Synchrotron facility went to Harwell; Daresbury has a wider range of businesses on its campus, but without as much support; similar too to Harwell (http://wp.me/p3beJt-r), which has a large number of businesses on its site – many related to the technology of its Synchrotron, where good technical support is at least on hand; but there is scant business support; and not unlike Rocket, a Berlin funder and supporter of early stage businesses (http://wp.me/p3beJt-8U), or the newly opened Edney Innovation Centre in Chattanooga, seen by its civic leaders as ‘the gateway to the city’s command-ing new business enterprise’ (New York Times.)

See also: Design your own Accelerators: an analytical review for innovationeers – johnwhatmore.com 8 Dec 2014 http://wp.me/p3beJt-K

John Whatmore
September 2016

Wharton on ‘Whither Accelerators’

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Accelerators: Wharton on emerging avenues

While the established Accelerators evolve, the field grows and segments: some are now corporate based, some property based, some employment based, some area based, some sector based, some market based; all of them chipping away at Silicon Valley’s market share.

 “Accelerators are a very expensive source of capital,” “If you’ve never launched your own startup before it’s great validation, and maybe you need that leg up. If you need a stronger network and you definitely need advisers – those are the key things accelerators provide you that is worth that 7%.” However, “If you’re a vetted entrepreneur or you’ve been at Google as an engineer and you’ve been at a fast-moving pace, an accelerator might even be a negative signal for a venture capitalist knowing that you’ve already committed 7%,”

What is it that is of value and to whom? Is it the interview process, the validation created by being selected, the mentoring, your fellow startups, the pitching process, the investment – or what?

Incubators Grow Up

Incubators provide space and resources for collections of young businesses, together with occasional mentorship. Accelerators are intensive development programmes for cohorts of around a dozen young ventures, working in close company, for around 12 weeks, with intimate help from mentors and advisers, in return for 6-10% of equity – with the objective of enabling them to raise seed capital from investors.

About half raise capital – good odds considering about one in 100 startups overall get funded, according to George Deeb, managing partner of Red Rocket of Chicago.

“The best programs have a substantial impact,” says Dave McClure, the founder of Silicon Valley accelerator 500 Startups. “The worst programs can probably cause damage.”

Techstars – an evolving archetype

Over nine years, Techstars has become one of the world’s leading accelerators, with programs in Berlin, London, New York, Cape Town in South Africa, and Tel Aviv, among other locations.

Those who enter the program give up 6% of common stock for the loan. They also receive lifetime access to Techstars’ resources, hands-on mentorship in a three-month program with office space, $20,000 in living expenses and connections to more than 5,000 experts.

Techstars reportedly now automatically offers a $100,000 convertible note to all startups upon acceptance. The note converts at a pre-money valuation [the valuation before outside funds or the latest rounds of funding are accounted for] of $3 million to $5 million, the company says.

In 2015, Techstars initiated an equity back guarantee program to address the shifting paradigm. With the preponderance of competing accelerators and other avenues to reach investors, Techstars officials now offer their startups a chance to lower or eliminate how much equity they give up. Startups have three business days after the program ends to reject the standard plan if they aren’t satisfied with what Techstars offers.

Deeb, a founding Techstars mentor, is a staunch proponent of the model that vets startups before investors hear about them. Techstars Chicago picks 10 companies out of 1,000 applicants, says Deeb. This way investors hear pitches from only the most promising startups as determined by the accelerator.

Corporates too are into startups

Another tentacle in the ecosystem can be found in Techstars’ collaboration with major corporations. Since 2015, Techstars had partnered with such heavyweights as Barclays, Disney and Sprint to create accelerator programs for each company.

Disney did not renew its contract with Techstars in early 2016 but continues to operate a startup accelerator. Kevin Mayer, Disney’s executive vice president of corporate development, has said the company isn’t investing in startups in order to make a quick profit like a typical venture capitalist…it is more interested in creating cutting-edge products it can use, as well as revitalizing its leadership by staying at the forefront of innovation.

Corporate leaders figure they can train and support aspiring entrepreneurs to be part of innovative projects in-house instead of having to pay millions later on to acquire them. “Opening an accelerator is a strategic decision that allows big corporates to stay relevant and competitive in a rapidly changing economy,” Microsoft’s general manager of accelerators Zack Weisfeld wrote this year in an opinion piece for Forbes.

 Incentives and objectives are of various kinds

Charles Bonello, a New York entrepreneur, investor and startup tinkerer, is co-founder and managing director of Grand Central Tech, a New York City startup hub that offers companies a year long program without charging rent or taking equity. The catch is that companies that complete the program agree to rent office space for four years in the accelerator’s extensive 1.1-million square foot building overlooking Grand Central Station, a building owned by the accelerator’s billionaire backers.

Many of the startups entering Grand Central Tech aren’t looking for seed money. They are attracted to the program’s impressive list of corporate partners that include Google, IBM, L’Oreal USA, Microsoft, Pepsico North America and JPMorgan Chase.

 Bonello and partner Matt Harrigan have a long-term goal of finding emerging companies trying to solve problems. “Our goal is to create a single point of density of the best technology companies in New York.” One of their first startups was Nagare Membranes, a developer of water filtration technology. By keeping like-minded entrepreneurs in the same office the men hope for cross-pollination in problem solving.

Employment as another objective of accelerators

“Looking at emerging markets, many see entrepreneurship as solving unemployment issues,” says one Wharton expert; but many don’t. “And many jobs are outsourced to other countries like India for IT.” Community and political leaders have many motivations for accelerating business in their region, but “it’s not clear it is working”, even though the Obama Administration’s Startup America Initiative has used many of the fundamental accelerator ideas to promote small businesses nationally.

In 2011, the Chilean government decided the best way to promote homegrown entrepreneurship was to create its own accelerator. The country’s economic development agency hatched the idea with Stanford University experts to create Start-Up Chile. Government officials offered entrepreneurs from around the world $40,000 of equity-free capital, infrastructure and work visas for one year to develop their companies over six months. The program also gave selected startups access to Chile’s financial network. The idea was that the recruited entrepreneurs would serve as role models for Chile’s budding startup culture, but it is uncertain how many stayed in Chile.

Muhammed Mekki, a founding partner of AstroLabs, has extended a corporate connection to Dubai in the United Arab Emirates. It has strong government backing for its partnership with Google to build a startup hub and training academy to promote online and mobile business throughout the Arab world.

“It becomes part of the culture, and when it becomes part of the culture, it becomes part of the government – to integrate this idea of startup mentality,” says Bambi Francisco, whose company Vator is one of the largest social network platforms dedicated to entrepreneurs.

Specialisation

The first accelerators recruited all types of companies instead of focusing on specific industries. But as these programmes proliferated they became more nuanced in targeting companies to accelerate.

Blue Builder is an accelerator in southwest France that caters to ocean and other outdoor sports in the picturesque fishing village of Saint-Jean-de-Luz, located in the heart of the surf alley in the Basque country. It also lies beneath the Pyrenees Mountains, providing a testing ground for all kinds of adventure sports products.

It offers a campus with prototype studios, workshops and a safe environment to experiment with materials such as polymers and resins used for building surfboards and snowboards, where those involved can maintain their lifestyle, and which is close to its market rather than close to coders or to sources of finance.

It works with entrepreneurs on specific projects to get them launched when they are ready to be presented to investors. It surrounds these creative trailblazers with brand designers, user experience designers, business developers and finance and legal experts to increase the likelihood of success during a year long assignment to build a product, such as one involving a sensor that measures surfboard movements in real time.

Moreover, it determines how much equity it gets based on the valuation of each company instead of taking a uniform percentage at the entry point.

Instead of looking for companies, Entrepreneur First in the UK recruits graduates, and then partners with the talent to build a company from scratch. This is one way to attract a variety of experts to work on a specific issue.

 Hybrid Approaches

The University of Pennsylvania is pioneering a new approach to entrepreneurship by combining academic applications with practical experience. Some argue that college is the best time to launch a business because of the proximity to so many people to test the product and gather feedback.

Penn’s Graduate School of Education (GSE) has created the country’s first executive master’s degree programme in education entrepreneurship. The school also helped create an Education Design Studio, a hybrid incubator and seed fund for education startups. Entrepreneurs who chose the incubator route have access to GSE’s professors to get the latest research on what is working in their areas of interest. But they do not earn degrees.

The model of offering two routes to launching businesses with academic support — in school while pursuing a master’s degree part-time or through an incubator program — is not limited to education startups.

A short form process

Started in 2007, Vator holds entrepreneur conferences in Los Angeles, London and Oakland, California, that can lead to investment deals. It has promoted about 175 companies through its startup competitions in the past five years. The winners get to pitch to investors at the end of their Splash events just like they would at an accelerator “demo-day.” Its startups have raised $700 million in capital without releasing any equity to the facilitator.

The future of the Valley

“People say nobody’s going to duplicate Silicon Valley. In many ways, it is part of the natural evolution that turned the San Francisco Bay Area into a global economic powerhouse with Apple, Facebook, Google and Twitter among the current stars.” “It has gotten easier in other places, but there is no doubt by every stat that it is the hub of entrepreneurial activity, especially in the web software services space. The big brands keep the Bay Area at the heart of American innovation. But the environment has changed.”

The mean distance between a venture capitalist and a company they invest in, says one old hand, is only 80 miles. “So, if you’re not in San Francisco or New York or a few other places, you’re unlikely to get access to funding.” He is sceptical of some accelerators that advertise a new approach with more access. Yet “There are reasons to have accelerators in cities Europe-wide because these people are cut off from the funding system and support system that exists for the lucky few in the U.S. But you can’t just copy Y Combinator and expect it to work.”

With investors more dispersed these days, entrepreneurs can create companies closer to their homes, which, in turn, can lead to organically grown startup communities that include accelerator programmess and localised funding – the type of industry plays a big role in where a community develops. McClure says it requires the “minimum critical mass” of startups and investment in entrepreneurs to develop a thriving hub. As many as 100 metropolitan areas worldwide have the potential to reach that threshold.

See: http://knowledge.wharton.upenn.edu/article/why-startup-accelerators-are-feeling-pressure-to-evolve/ July 2016

John Whatmore, September 2016

 

Finance for small businesses – problems

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Better financial support for hi-growth ventures In identifying finance issues faced by hi-growth young businesses, new research has set a number of targets for the British Business Bank, for which it faces immense difficulties.

 The government’s British Business Bank, established in 2014, is focused on smaller businesses, and its main remit is by working with and through private sector delivery partners to increase the supply of finance available in areas where markets do not work effectively.

It reports that over 10,000 smaller businesses are now benefitting from finance supported by the bank compared with a year ago, and from a wide range of sources, but with no specific focus on hi-growth businesses, where there are evidently significant problems.

The recent Scale-up Report, sponsored by Barclays and the work of the Judge Institute in Cambridge and the Said Business School in Oxford has identified six major needs for smaller businesses with hi-growth potential:

*         increasing the number of large VC funds

*         growing the number of experienced investors with sector experience and         international networks

*         developing a venture debt market

*         establishing the LSE as the leading stock market for scale-ups

*        developing new approaches for creating liquidity in private company shares, and

*         collecting systematic data about financing scale-ups.

Many of these fall into the lap of the Bank.

Its CEO feels that London is now well supplied and the bank has recently started to focus on the less well supplied areas of the country such as the ‘Northern Powerhouse’. It is currently aiming to set up funds there for which it is seeking tenders for fund managers, who will bring with them their own local ecosystems of supporters (on the lines typically found in Cambridge.)

Secondly it has sought to bring together under a single head the dozen or so sources of financial information that growing businesses need (in a publication entitled the Business Finance Guide).

And it is now giving growing attention to the complementary need for mentors/advisers to give specific help and advice on finance to early-stage ventures. At present experienced finance mentors for hi-growth businesses are not easily found. The source booklet, just published, is very different to good advice being on tap just when it is needed; small businesses have neither time nor inclination for research.

The bank already seeks to ensure that its startup loans are also accompanied by the appointment of mentors (as it does loans made by the Angel Co-investment Fund – which it funded.) It is seeking to do this on a national basis and in an enduring way – with organisations like the UK Business Angels Association and the Institute of Chartered Accountants.

It has a challenging task in that while its aim is to enhance the more entrepreneurial part of the economy, it seeks to do so through other organisations, and through a number of them.

In working with small businesses the bank also faces a disconnect: it exhibits all the trappings of a major financial institution, while its direct links with small business are tenuous.

The Barclays Scale-up Report has identified some very specific targets for the British Business Bank. They depend very much on the influence it can bring to bear. As a brand new organisation, it has a mountainous challenge.

John Whatmore, July 2016

A new Accelerator Lab by Accenture

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A revolutionised Accelerator Lab Helping corporates to work with innovative young companies to introduce innovations in the fast-changing retail field.

Nesta’s work with P&G in 2010, where Nesta acted as the confidential intermediary for half-a-dozen startups, was a door-opener into the field of Open Innovation.

The latest such opening is a dramatic evolution of Accenture’s Fintech Lab Accelerator, where a dozen banks each provided a chaperone whose role was to help the half-a-dozen young ventures that had been brought together at Level39, to introduce their products to the relevant managers in these banks.

Where the banks faced major threats arising from new ways in which financial transactions could be made, the retail trade and brands are fighting a rearguard action to counter Amazon’s lead in online retailing; and they are doing this by majoring on

  • individualisation,
  • sophistication and
  • personalisation

In Accenture’s latest version of the Accelerator Lab, launched with a razzmattaz of a major conference on the future of retailing, complete with a store of the future, innovative businesses had been invited to enter a competition, whose winners and runners-up were then offered eight weeks together at The Trampery co-working space in Shoreditch; and the dozen major retailers (Argos, Sainsbury’s, Kingfisher, Specsavers, Dixons/Carphone – among others) who participated in the programme were invited to presentations and discussions with them over the period of their residency.

Millenial 2020 (millenial20-20.com)is a process created by Accenture for corporates in retail. It kicked off with a two-day conference – a grand gathering of over 3,000 startups, brands, retailers, and corporates encompassing four industry sectors, at which Accenture set up a store of the future, entitled The World of ME: Millenial Expectations: an inspiration playground for the consumer experience and store playground of the near future’, ‘an immersive experience that brings together a curated selection of start-ups and brands to explore millennial-driven products and services expected to influence the retail and consumer landscape of the near future.

 Will the store no longer be solely a place to purchase things, but a port of call for expertise, unique brand stories, immersive experiences and even a place to learn, create products and connect with like-minded individuals?

Accenture had invited companies to pitch their ideas for innovation to judges from the twelve participating organisations for the Accenture Consumer Innovation Awards. 170 applied and sixteen were invited to pitch – in four categories:

  • Get me into the store and spending more
  • Get me what I want and when and where I want it
  • Make ME digital on the inside, and
  • Give ME omni-personalisation

 “Ignite your senses Using all five senses, play with products and innovations curated to illuminate future scenarios we see emerging. For example…

– Experience what on-demand personalisation could mean for jewellery by trying on and designing 3D printed pieces from WonderLuk.

– For the Conscious ME millennial, brand values that align with beliefs and identity will become a given. Touch and feel a textile made from citrus peel, brought to you by Orange Fiber, one of 5 winners of the H&M Conscious Foundation’s Global Change Award.

– Experiences will start to become the product. Swipe left or right to determine your preferences and find the right food pairing to match the craft beer you select, all powered by Accenture Customer Genome and Intel.

For Accenture this was an experiment in creating processes that would support major changes in sectors – disruptions or major challenges; and so both enhance and demonstrate to potential customers their armoury of processes in the consultancy business. It is being repeated later in the year in New York and in Singapore.

Corporates, including Barclays, John Lewis, Tesco, and most notably Telefonica, have gone down the path of running their own Accelerators despite disadvantages to the startups involved. In participating in group Accelerators, including in the insurance industry, the food industry, the healthcare industry and the New Cities initiative, startups have accepted the risks that openness involved.

More an opportunity for corporates and early-stage businesses to get thoroughly acquainted than to get engaged, Accenture’s innovative new ‘immersive’ process has played on their willingness to be open and transparent. Only time will tell whether it has facilitated the development of innovations into new products or services.

John Whatmore, July 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

Hi-growth ventures need close support

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Hi-growth ventures need close support

Backers, investors and partners are essential supporters for these businesses, says the Barclays Scale-up Report – and experienced new-business leaders, says another.

The Barclays Scale-up Report, just published, has focused on paths to success for early-stage hi-growth businesses. So what support will help them most to achieve successful growth?

A recent report conducted by Deloitte Denmark and Board Network – The Danish Professional Directors Association, called “Radical Innovation and Growth: Global Board Survey 2016 ” opens up concerns about the current boardroom and its great difficulty with managing more radical innovation.

It suggests that there is a need for greater insight into the area of innovative initiatives, grappling with organisational design, dealing with risk and failure, and for sheer experience in working in the huge discomfort zone driven by accelerating technology.

The Barclays Report portrays the problems of scaling up in terms of a series of challenges that businesses need to recognise and handle at the right moment – as they start up, take off, and accelerate into sustained growth, in particular:

  • aiming high – ambition
  • building a strong team
  • establishing partnerships
  • putting effective management systems into place
  • identifying core competences, and
  • articulating competitive strengths and new market opportunities.

While there may seem little new in these challenges, several of the recommendations emphasise the role of stakeholders in supporting scale-ups; and the research illustrates the importance of two factors: the timeliness and firmness with which the relevant issues are tackled; and the value of support in doing so.

The Report refers repeatedly to the functions of the Board, and implies a need for board members who are both involved and active, and for a board that meets frequently, with an eye more on the future than the past.

It underlines the importance of frequent and regular reviews of directions, resources and progress, including ‘strategic activities and partners’. (Telefonica’s Wayra Lab mandates a ‘board’ meeting once a month, as do many companies).

The Barclays Report emphasises the importance of including in this process backers, investors and partners (and the Deloitte Report would add: experienced new- business leaders) to bring to bear a range of perspectives on the issues under discussion – especially as regards technology and competition.

And a focus at board meetings on the future helps to underline the importance of ambition, progress, opportunity and the evolution of the business, but also on the imminence of change.

John Whatmore, May 2016

 

A board agenda (based on the recommendations in the Scale-up Report)

  • Are our current targets and plans based on ambitions that are high enough.
  • What do we now need to do to position the skills and abilities of our team for achieving the growth that we envisage.
  • Do we need to change our partners and suppliers so that they accord more closely with our strategic objectives.
  • Are we satisfied with the level of and plans for the standardisation of our systems and processes.
  • Have we identified and can we articulate our core competences – the unique knowledge that underlies our capability to compete.
  • Are our competitive strengths in the eyes of our customers related to our processes and knowledge; and are they the foundation of our strategy.

 

SMEs need someone to act as ‘chair’

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SMEs need someone to play the chairman role even more than do bigger businesses Lead mentors have the ability to ask the right questions and to turn up with someone who has just the expertise you are about to need.

Wayra Lab, Startupbootcamp and Techstars all attach mentors to their young businesses so as to provide feed-back and advice at the moment it is needed – on a proactive basis, not just when it is sought. This is in sharp contrast to Incubators such as those at Sussex Innovation Centre, Imperial College and UCL’s IdeaLondon and others, where advice or help is provided when it is sought – on a reactive basis.

There are topics that early-stage businesses know little about (eg development grants, intellectual property); there are things they don’t know how to do (eg 3D printing, ‘chatbot’ publicity); there are tasks of which they have little experience (eg strategy and management), where someone who has ‘done it before’ is invaluable. And in a world of disruptive advantage, time is not their ally.

Jim Milby who mentors several small businesses, recently retired as a Director of Barclays Bank, where he has ‘seen a few businesses’ and ‘knows a lot of people’. It is his extensive experience, his connections and importantly his independent voice that make him highly valued by the SMEs he works with. He has always insisted on having a regular review of progress – once a week ‘because you don’t want to go pitching for funding before you’ve got some customers.’ While the team, he says, are preoccupied with driving towards their current objectives, he might be asking questions about whether it is time to change something – in the product, or the target market segment, the key customer benefits, the strategy for getting there, or even the team itself.

John Whatmore, April 2016

Growth Builder: a new initiative for hi-growth SMEs

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Growth Builder is a new initiative for hi-growth SMEsAimed at supporting key drivers of the economy, the programme builds on recent experience with accelerators, but is minimal in relation to overall needs.

While the last few years have seen a focus on startups and early stage businesses, a report just published by the government’s British Business Bank, has suggested that “a lack of businesses scaling up” was dragging down the UK economy, a verdict supported by data from the Organisation for Economic Co-operation and Development; and that “there remains a need to stimulate a greater volume of businesses that can be scaled-up, including small and medium-sized exporters – to counteract the UK’s lagging productivity” – an issue that is also being addressed by the new Scaleup Institute.

The new Growth Builder scheme, just launched, aims to help 50 hi-growth companies through a 12-month programme of workshops, offering advice and mentoring on every challenge that growing businesses face, from creating an HR department to exporting and managing cashflow.

The components that are ‘compulsory’ are:

  • a curated exclusive high-growth peer network.
  • Six tailored workshops with successful inspiring high-growth founders, sharing insight into their experiences and lessons they learned from their supporters to apply in the selected business.
  • Six profesionally facilitated tutor groups offering an opportunity to share knowledge and challenges and gain a fresh perspective from peers in a supportive environment.

And optional are:

  • Monthly events tailored to individual growth challenges to inspire and inform.
  • Four networking events bringing together successful high-growth founders, influencers and decision makers within the public and private sector to facilitate beneficial connections.

It is a joint venture, supported by the Government’s export arm, UK Trade & Investment, as well as NatWest, BT, UCL, Loughborough University, the UK Business Angels Association, PIE Mapping and Fast Growth Forum.

The initiative is headed up by Lastminute.com co-founder Brent Hoberman, growth champion Sherry Coutu, and Betfair co-founder Ed Wray, who will act as mentors for the companies involved.

In a poll of businesses turning over more than £1m, 60% of those surveyed claimed that the “scale up” phase was the toughest they had faced in business, compared to 19% who said the start-up phase was the most difficult; while just 4% struggled most as a medium-sized firm, according to the research, commissioned by the Telegraph and conducted by entrepreneur network The Supper Club. More than half of these entrepreneurs claimed that hiring people and managing staff were among the toughest challenges for fast-growing start-ups, with raising finance and business strategy also high up the list.

Any company turning over more that £1.5m or employing 20 staff or more is eligible to apply, provided its sales are rising by more than 20pc a year. Applications have to be in by mid-March.

The Government’s recent abandonment of the Business Growth Service (which provided access to mentors for businesses with hi-growth potential) seems more than perverse just at the moment when Innovate UK had begun to roll it out to its grant winners.

Among other recent initiatives,Tech City, the Government-backed organisation that champions the UK’s technology sector, unveiled its Upscale initiative last month, which also aims to help 30 firms. The International Business Programme, has also just been launched by the Mayor of London, Boris Johnson, which will offer 50 fast-growing firms the opportunity to join trade missions to the US, India, China, and Europe.

While all this is encouraging, it bears no relationship in quantative terms to the 6% of businesses identified by Nesta as the most significant contributors to growth of the UK economy.

John Whatmore, March 2016

A UNIQUE FORM OF SUPPORT FOR EXECUTIVES IN SMEs

Aside

A UNIQUE FORM OF SUPPORT FOR EXECUTIVES IN SMEs

These mutual problem-solving and support groups for senior executives in well-established SMEs would be beneficial in every incubator, science park, innovation centre and tech hub. All they need is a good facilitator.

Next up: Oxford Innovations – a major source of incubator space in the South East, but one that provides meagre support for occupants.

‘Vistage’ forms groups of senior executives from SMEs, each group of about a dozen people, who meet regularly to help each other to:articulate their issues (‘what is your biggest pain point?’)

  • clarify their thinking (‘what is its root cause?’)
  • identify possible solutions (re-motivate/hire/fire?)
  • and to hold them accountable (‘What are you doing about it?’)

(- comparable to the Belgian Plato programme (see below.)

It now has some 1000 members in 70+ such groups in the UK. Big in the US where it started several years ago, it now operates in 16 countries with over 20,000 members.

Each group is of about a dozen senior executives, all with similar levels of responsibility. (Groups in the Plato programme are matched both for function (eg marketing/finance etc) and by industry.) Vistage runs some for large SMEs (£4mn+ turnover); some – on a smaller scale – for smaller SMEs; and some for ‘key directors’.

They meet on each other’s premises, normally monthly, for a full day, in which they draw from each other’s experience. The centrepiece of the day is for two (or sometimes three) members of the group to bring a key issue to the table, by:

  • stating succinctly what it is
  • saying why it is important
  • and indicating their ideal outcome.

Other members of the group then ask questions to get to the heart of the problem (diverse thinking being encouraged) until in a final round, each person proposes their solution. Only then does the problem-owner comment, and say what he or she will now do.

Most meetings will start with a presentation by a well-recognised speaker – on a relevant topic; and may finish with a general discussion on a common or topical issue. These groups have a life of their own, including an annual retreat; and this life is itself managed by the group.

Between meetings of the group, each of its members has a coaching session with the Chair of the group, focusing on their current major challenge; and helping them to make decisions about what they will now do. Those who were in the spotlight at the previous meeting will be asked what have they done since; and they will be asked again at the next meeting of the full group.

The nature of these groups consists in:

  • willingness to accept vulnerability
  • the sharing of issues, experience and ideas
  • and the acceptance of challenge.

Openness to these qualities is the overriding requirement for joining any group. Group Chairs have a crucial responsibility for putting groups together, for which they depend on their interviews, though some candidates may attend the Speaker workshop part of the meeting as a guest, and sometimes they join for a trial period.

Candidates come from several sources and have to be invited by the Chair – to ensure that they’re right for this kind of meeting and for the specific group. (To ensure openness and confidentiality, no group can include competitors, suppliers or customers). The fact that most group members sustain membership for long periods of time makes it clear that these groups have a role that is different to any other relationship in almost any organisation – whether with directors, colleagues or subordinates – essentially because of their intimacy (they could be said to be addictive and comforting – a bit like the confessional!)

The group Chair is of course responsible for sustaining the life of the group, for organising and facilitating the meetings of the group, and for the one-to-one coaching sessions between each of its meetings. Vistage carefully selects Chairs, and runs training and development courses and events for them. The expert speakers are equally carefully selected and only retain their Vistage accreditation if the members score them highly.

In addition to the group meetings and 1-to-1 coaching, Vistage also runs a series of exclusive keynote speaker events throughout the UK – to further support the development of group the members, but also to help them develop their teams.

It is evident that Vistage supports growth in the businesses concerned (apparently three times that of the average SME), just as it also helps to allay the stresses in those involved.

The main advantages of this well-established model (which is not unlike that of Action Learning) is that it:

  • focuses on major issues
  • brings to bear on them a wide range of thinking and experience
  • encourages decisions and action
  • enables close relationships with a number of fellow travellers
  • and provides comfort and re-assurance.

However, it does not necessarily provide advice related to the specific context of those issues (eg the sector), nor from people with closely related businesses.

January, 2016

A comparable programme:

AN OPEN INNOVATION LEARNING NETWORK – FOR SMEs AND OTHERS

I have just returned from a two-day workshop in Belgium about mentoring small groups of senior managers in SMEs, who meet together regularly to draw on each other’s experience, and with the support of mentors – a striking example of collaborative enterprise. Set up by a passionate individual in East Flanders Chamber of Commerce, it has been running for twenty years and has now been seeded in at least fifteen different countries. April, 2012. http://wp.me/p3beJt-H