Thanks for coming to the workshop: Are you an Entrepreneur?, below are the slides for the first session in pdf format.
I look forward to seeing you at the final session.
P.S. Please comment below on what you thought of the workshop?
I learned much too late about the value of mentors and seeking them out.
If I had realized this value and had the benefit of a mentor in my early entrepreneurial life I am sure I would have avoided the very many mistakes I have made and the holes I have fallen into. I would have also had someone to relate all my fears, problems, successes and general issues with – this alone would have helped me a great deal.
Instead I have learned the hard way, failing way more than I should have, in order to get the experience necessary to succeed.
My way was NOT the smart way but I didn’t know any better.
In your case I do hope you will spend the time and effort to seek out and find a local mentor or mentors to help you achieve your dreams.
These are found all over nowadays, from school and university, to MBA programs, angel investor groups, government and commercial mentoring groups to you friends, colleagues and peers.
Make the time to work out what skills and areas you think some advice or support will be needed for you right now and for any business or idea you have and then set out to find the best people you can to help advise you.
If you are a seasoned CEO you can still have a mentor, although these tend to be more specialised and cost money vs. the many people will help startups for free.
In a recent www.ft.com article Robert Garvey said:
“A good mentor challenges you to be critical and pushes you to think things through,” says Robert Garvey, professor of mentoring and coaching at Sheffield Hallam University. “But at different times a mentor can also be a listener, a counsellor and someone who offers you access to their networks.”
In some cases mentoring is a simple transfer of knowledge from an old hand. In another, a mentor challenges and supports the entrepreneur to find solutions independently, rather than giving answers.
“Mentoring isn’t telling people what to do. It’s helping them discover what needs to be done so they can make decisions for themselves,” he says.
In my work I have mentored over 100 mentees in every walk of life, idea and stage. I can say that what they most liked was direct help and advice when they had tough decisions to make and also a ‘shoulder’ to cry on when things got tough.
I have also mentored more formally as part of teams at the London Business School, Stanford and HAAS and in these cases I supported work of MBA teams towards their goals of pitching for funds from VCs.
My advise when finding a mentor is first to find one that is not arrogant and self important! Then find one that has domain expertise you might need for an idea or for the problems you are likely to face i.e. if you have a startup don’t get a mentor or a big international law firm. Finally, find one that will align their interests with yours, either just giving you some free advice or if they become more involved in your business then get them to contribute in some way.
I always ask for some “sweat” equity or funds from those wishing to get involved in my startups. But if people help you for free you need to reward them with money when you get some or shares in my view.
On the other had I caution entrepreneurs in the startup phase from paying for advice or help as i have seen some people try and prey on early stage businesses for their own gain and not for the good of the entrepreneur – so be careful.
Doug Richard, the angel investor and former Dragons’ Den panellist, argues that the best mentors contribute equity capital as well as their experience: “There’s nothing more aligning than putting your money at risk.”
Here are sensible precautions that will make mentoring work from the FT:
- Search for the right person. “Draw up a profile of the sort of person you think can help you, ideally with someone you know well,” recommends mentor Brian Chernett. “Then interview prospective mentors against your criteria.”
- Be prepared to be challenged. For a mentoring relationship to work the personal chemistry has to be right, says entrepreneur Keith Miller. But don’t choose anyone who resembles you too closely in experience and outlook, advises Prof Robert Garvey. “The role of the mentor is to challenge, not to reinforce what you already think.”
- Do the due diligence. Successful mentoring depends on an honest relationship between the mentor and the mentee. But entrepreneurs who take mentors into their confidence need to take sensible precautions to safeguard their commercial interests, cautions mentor Brian Sweeney. “Insist on a non-disclosure agreement and check with other businesses that the prospective mentor has respected confidentiality issues in the past.”
- Have an exit strategy. “Start with a short-term contract and, at least once a year, evaluate whether the relationship is achieving what you want it to achieve,” Mr Chernett says.
I saw an interesting post by a bunch of hackers discussing what it would take to get out of the game or fu**-off out of it as they put it. (http://www.danielharan.com/2008/09/04/vc-part-2-fuck-off-money/)
Which startup odds do you prefer?
50% odds of making $1 million
20% odds of making $20 million
Assume the work involved is the same, and that in both cases that the alternative is a complete loss. If you’re economically rational, you’ll compute the “expected value” of each investment.
50% of 1 million => 500k
20% of 20 million => 4 million
VC has to be rational to maximize return for their partners. They have to be rational. And that’s the crux of the problem: our incentives are not aligned.
We don’t have to play by the same rules. Just as the cost of starting a company has been going down, it’s also become less risky to pull off small successes.
20 million isn’t 20 times more useful than 1 million. It won’t make you 20 times happier or let you be 20 times more effective.
It raises a point I often argue with my friends about how to raise funds and whether a home run is always the smartest option for a business.
For example you can build a perfectly good, profitable business on angel funds and sell it for a smaller amount with less risk and no VC ratchets.
However, if you want to make a lot more money and don’t care about the odds being way lower too then VC can be the best way to go, you get more runway and pressure to get the much bigger exit and IF that pays off you will hopefully get a bigger pay-day. This assumes you don’t get fired or diluted by the VC along the way!
In the end it comes down to what you really want out of life and if you measure the money how much do you really need to live off.
If you know that then you can work out your fu**-off money exit needs!
Take a look at my book and work out your life goals first, then you can work out what’s best for you!
What? You can’t be serious…the VCs will never buy that!
“Start with the exit and work backwards” is a direct quote from one of my most respected and successful entrepreneurial friends – he has made over $100M personally.
Frankly in the investment community the idea is deeply unfashionable…but when did I ever care about the fashion of VCs? Never! That’s when, I think most of the investment criteria and sheep mentality of the investment community is just so much B.S. and it drives me nuts. So I do what I think is right and what I believe.
OK, the idea ‘de jour’ is that you must want to change the world and then money will rain down on you from the heavens…pah! Neither idea is in fact wrong, but my friend’s is more likely to make you some money. If you don’t want a lifestyle business that is.
Rant over, so why is this idea of the exit at the beginning powerful and important?
It’s simple – it gives you a focus and makes you think about your outcome.
When working with many mentees and new entrepreneurs they think they have a world changing idea but have never thought about how they will create an end point for them and their investors. “So what” you say, let’s just do it and work that stuff out later!
Well here’s why you should create a business with a definable and preferably measurable exit that you can prove can be achieved (as apposed to the “we will IPO or get a trade sale” standard jargon that means nothing and is not worth the paper it’s written on):
- If you actually try and find someone who ‘may one day‘ buy your idea or company it will make you look at the future and what the real prospects of an exit really are…in most cases they are not great and could lead you down a different path.
- If the exit starts to not look so likely it can make you change your idea, your business model, your business all together. If you don’t care then you are just making your chance of success so much smaller.
- If you have a world changing idea that makes life so much better for the rest of the planet, it doesn’t mean that someone like google will drop by and buy you – sorry it just doesn’t. If you think about who you may sell too you can check out their acquisition history, what types of businesses they like to buy, at what stage and why. If you know that it can help you position your business in such a way as to make it highly attractive at the right time.
- Often it’s your competitors (the bigger ones) that can buy you out so it will force you to learn a lot more about them and their goals, ambitions and requirements. This process will help you create a business that fills a hole in their product range (for example) which will achieve two things: it will make you attractive but it will also show you a way to succeed against the competition you may not have noticed before.
- If you think you will IPO, it will make you look at the markets and think about you will need to deliver in order to have a successful floatation – a very expensive and much harder prospect than you can imagine, especially in the US. Also, it will make you consider the quality of your people and who you could take on to give your business the right connections in the city when the time comes (a ‘name’ can be very important to the city).
- If you are thinking of an IPO you have a few choices and these may come up faster than you think. If you plan early you can structure your business correctly both legally and financially to take advantage. Timing is everything with the markets and once again planning means you can get your IPO away at the right time and valuation. Some early stage businesses can IPO very early in their development so it’s worth considering from day one.
- If you do some long range planning you will find out all sorts of things at the beginning about your fellow partners in crime you would not imagine – you may not all agree about the amount of an exit, the timing, the implications and this is the best time to find out if you disagree, not 3 years later. Often you can have people in a start-up that are at different life stages, especially where you have a big gap in ages. The older ones will be more conservative and the young ones have little to lose – this causes issues in my experience. Work these out early.
- If you have actually taken the time to do the homework that my suggestion requires, including meeting prospective buyers early as I tend to do, you will get much more respect from them and this in turn increases the chance of an exit. In addition, you will get more respect from your investors by showing that you care enough to consider the future and are focused on showing a return on investment.
So, as you can see, there’s more to an exit then meets the eye and thinking about the future at the beginning can add a great deal of value to your business and it can also help you shape your strategy from day one to be more competitive and likely to succeed.
Of course, you should be looking to create a world class company that adds real value to the world – even changing it for the better but this shouldn’t stop you thinking ahead either.
None of these ideas means you have to sell or makes you sell based on your original strategy, it simply makes you think about the future and plan accordingly.
Many years ago I woke up from a long sleep just like in the matrix (one of my favourite movies). I was curious, inquisitive and wanted to try something new.
I was like most corporate executives at the time, working hard, playing hard, big mortgage, big lifestyle and more than enough keeping up with my successful friends…then one day I was made redundant from my high paying job when my employer ran out of money. I could have easily got another job back with another big corporation but something stopped me and made me think.
Redundancy forced me to consider what I had thought about in the back of my mind for years (and had been toying with since an early age) – to take the red pill!
The question of which pill to take illustrates the personal aspect of the decision to become an entrepreneur again (I started my first company at age 18). Do you live on in ignorance (and potentially bliss) or do you lead what Aristotle called ‘the examined life’…
The Matrix is a film filled with religious and philosophical symbolism. The plot supposes that humans live in vats many years in the future, being fed false sensory information by a giant virtual reality computer (the Matrix). The perpetrators of this horror are machines of the future who use humans as a source of power. Humans are literally farmed.
The central character of the film, Neo, is presented to us in the opening part of the film as a loner who is searching for a mysterious character called Morpheus (named after the Greek god of dreams and sleep). He is also trying to discover the answer to the question "What is the Matrix?"
Morpheus contacts Neo just as the machines (posing as sinister ‘agents’) are trying to keep Neo from finding out any more. When Morpheus and Neo meet, Morpheus offers Neo two pills. The red pill will answer the question "what is the Matrix?" (by removing him from it) and the blue pill simply for life to carry on as before. As Neo reaches for the red pill Morpheus warns Neo "Remember, all I’m offering is the truth. Nothing more."
The film as a whole and especially the choosing scene is deeply compelling. Why is the choice between what you believe you know and an unknown ‘real’ truth so fascinating? How could a choice possibly be made? On the one hand everyone you love and everything that you have built you life upon. One the other the promise only of truth.
The question then is not about pills, but what they stand for in these circumstances. The question is asking us whether reality, truth, is worth pursuing. The blue pill will leave us as we are, in a life consisting of habit, of things we believe we know. We are comfortable, we do not need truth to live. The blue pill symbolises commuting to work every day, maintaining the status quo, keeping up with the rest of your peers and being on a hamster wheel of work that’s very easy to stay on until you retire.
The red pill is an unknown quantity. We are told that it can help us to find the truth. We don’t know what that truth is, or even that the pill will help us to find it. The red pill symbolises risk, doubt and questioning. In order to answer the question, you can gamble your whole life and world on a reality you have never experienced.
However, in order to investigate which course of action to take we need to investigate why the choice is faced. Why should we even have to decide whether to pursue truth?
The answer in short, is inquisitiveness. Many people throughout human existence have questioned and enquired. Most of them have not been scientists or doctors or philosophers, but simply ordinary people asking ‘what if?’ or ‘why?’ Asking these questions ultimately leads us to a choice. Do you continue to ask and investigate, or do you stop and never ask again? This in essence, is the question posed to Neo in the film.
So what are the advantages of taking the blue pill? As one of the characters in the film says, "ignorance is bliss" Essentially, if the truth is unknown, or you believe that you know the truth, what is there to question or worry about?
By accepting what we are told and experience life can be easier. There is the social pressure to ‘fit in’, which is immensely strong in most cultures. Questioning the status quo carries the danger of ostracism, possibly persecution. This aspect has a strong link with politics. People doing well under the current system are not inclined to look favourably on those who question the system. Morpheus says to Neo "You have to understand that many people are not ready to be unplugged, and many of them are so inured, so hopelessly dependent on the system that they will fight to protect it."
The system also has a place for you, an expected path to follow. This removes much of the doubt and discomfort experienced by a trailblazer.
The question is are you really a trailblazer, a loner, an entrepreneur? Or are you happy in your world where the rules are made for you by someone else, where you have a set of ‘rails’ along which to run and are controlled by the system. The symbolism of humans being farmed for energy is too close to comfort for me now that I have been out of the ‘farm’ for over 10 years.
Which pill will you take…?
See part two for the results of that momentous decision.