The bloody truth about the startup fairytale

Great White Shark, preditor, threat, risk,
A shark attack is rare, but not as rare as a successful startup business.

 

Sharks kill five people every year. Five out of 7.4billion (and counting). It’s hardly a significant proportion, is it?

 

In fact, it’s so unusual, every time a shark attack is reported anywhere in the world it becomes global news. It’s a big story and people are fascinated.

 

No-one cares that billions of people go swimming every year. There are billions of instances of that happening, it’s not unusual. But a shark attack… Wow.

 

That’s just how the news works. There must be some intrigue. There must be a break in the usual narrative for it to be informative and compelling. It must be uncommon to be newsworthy.

 

The misconception is that this only happens with ‘bad news’. That somehow something is only newsworthy if it is gruesome or negative – like a shark attack.

 

Wrong.

 

Introducing the fairytale of the successful startup

 

A quick search for “startups” and a scan through social media and online news channels paints a wonderful world of free stuff, unicorns and angels (fairytale anyone?).

 

We read inspirational articles in entrepreneurial magazines and quotes from those who have ‘made it’ telling us to: “dream big”, “be the difference” and “reach for the sky” … Okay, that last one might be Woody from Toy Story, but you get the idea.

 

This is news. It’s a break from the usual narrative. It’s a shark attack.

 

700,000 new startups in the UK every year

 

There are almost 700,000 new startups created in the UK every year (and that number is growing by the way). There is more than £1.5billion in seed funding invested into early stage startups by angel networks every year. The news is filled with rousing stories about how awesome it is to be an entrepreneur, how fun and exciting startupland is and how much funding is available to new businesses. The streets are lined with gold, don’t ya know?

 

Why no stories about startup failure? Why aren’t we hearing about those who go bust or don’t make it past that first year of happy-clappy startup school with the free beer and seed investment?

 

No-one cares

 

There are hundreds of thousands of them every year. It is so commonplace it’s not a news story. We don’t talk about it because it’s mundane – it’s the norm.

 

So WTF is happening to those 700,000 new startups and that £1.5billion angel investment every year? Where are the 3.5million businesses that have been created in the UK since 2011?

 

What are we doing?

 

I’m calling time on startup fairytales. We need to start learning the lessons of those serial catastrophic failures. We need to shout from the rooftops about what is going wrong. Why are 77% of seed-funded businesses not reaching Series A?

 

Sure, celebrate the successes, but understand the context in which they are successful. If the successes are the news, then there’s a shitload of work still to be done.

 

If you’re an entrepreneur on the front line of startupland right now, enjoying your new-found flexibility, cosy co-working community, the buzz of chasing seed investment and everyone telling you how brave you are: beware.

 

I used the analogy of a shark attack earlier so, keeping with the theme, if you are unfortunate enough to be one of the 90-odd people attacked by a shark each year, you still have a 90% chance of surviving.

 

Yep. Statistically speaking, you have a better chance of surviving a shark attack than you do getting your startup business from seed round to Series A.

 

Not such a fairytale after all, eh?

 

So, what’s the answer? Create fewer startups? Stem the tsunami of startup accelerators and business incubators flooding the market?

 

Nope. Of course not. We are experiencing a startup revolution. The UK is more startup friendly than it has been for a long time. Close to three-quarters of a million new businesses are being created every year and the vast majority are supported, in some shape or form, by the thousands of startup accelerators and support systems popping up all over the country.

 

That’s a good thing. No, that’s a great thing!

 

But therein lies the rub. We got so excited with all the ‘startup stuff’ that we forgot we needed to build businesses.

 

The average UK business accelerator programme now runs for just 21 weeks. Twenty-one weeks! That’s great for knocking startups into shape with a business model and securing seed funding, but 21 weeks is nowhere near long enough to build a sustainable business.

 

So what happens? More than 60% of those fresh-faced, inspired and energised startups go pop. Business survival rates are as poor (in fact, they are marginally poorer with ONS figures for 2006 recording five-year survival rates at 45%) than before our startup revolution began.

 

That’s simply not good enough.

 

We need to recognise that building a business takes time. Finding the right investor and nurturing relationships with staff and suppliers (not forgetting customers) takes time. By all means “move fast and break stuff”, but 21 weeks is even pushing it for Zuckerberg’s Facebook.

 

Not for startups who get excited by seed investment

 

We created Moonshot to partner with entrepreneurs interested in building multimillion pound ventures. Not startups who get excited by seed investment.

 

Our partnership is non-exclusive, we don’t insist our business builders only work with us and in fact many of our Moonshot businesses started out in one of the UK’s fantastic accelerator programmes. However, we are there to slingshot them from ‘accelerator graduation’ to multimillion pound exit. That’s what we do.

 

If you’re an entrepreneur on the front line of startupland right now, enjoying your new-found flexibility, cosy co-working community, the buzz of chasing seed investment and checking in with your awesome mentor: take heed.

 

You might feel comfortable in the tepid shallow water, but soon you’re going to take your seed funding and leave the kiddy pool to venture out into the cold, expansive ocean.

 

Are you prepared for what’s coming?

 

Avoiding the pitfalls that lead to zombification

zombie, zombification, startup zombies

 

Apparently Brad Pitt filmed a movie in Glasgow all about zombies.

 

Many of the streets around the city centre were renamed and given American-style street signs so it looked like a typical US city centre.

 

Zombification in the start-up scene

 

I’m not a fan of zombie movies, so I cannot say I’ve seen this particular film. But, as I speak with numerous UK start-ups and many angel investors, there would appear to be a fair bit of “zombie-ism” or “zombification” taking place in the start-up scene.
There is nothing better than a pitch from an entrepreneur that blows you away. It should be well rehearsed, but not robot like.

It should cover a few of the staple bases, but not be too technical. It should be delivered in a professional and business-like fashion to show respect to the audience and potential investors. There should, in short, be enough to hook an investor into wanting to find out more.

 

Then, if an entrepreneur communicates well with investors and completes some due diligence, a seed investment of say £150,000 can land. It seems £150,000 is a nice number as it dovetails well with the Seed Enterprise Investment Scheme, where up to 50 per cent of an investment made in a qualifying company can be offset against a private investor’s tax burden.

 

So, whether the start-up entrepreneur needs 150 grand, the magical pitch number is – yes you’ve guessed it – £150,000. So, in it goes and the entrepreneur looks at her bank account and her breath is taken away.

 

Yippee!

 

My word, after all that pitching and diligence, HMRC work and business plan formation, she now has someone else’s cash to run her start-up and shoot for the moon. Yippee!

 

But then something happens. Reality kicks in…

 

But then something happens. Reality kicks in and the entrepreneur has to do what she said she would do. She has to hire at least one or two key members of staff. She has to negotiate on contracts, terms, incentives, share options and the like. Then there is the new workplace pension and setting up everything with HMRC and her accountants on payroll, etc.

 

The business of running the business

 

Of course, there will be some form of premises needed to rally the team and stick on the website. There may be the formation of a board and the appointment of non-executive directors as specified by the investors. And still there is the business of running the business. It is here that the zombification process starts to form.

 

focus on hitting certain agreed metrics and targets

 

While the entrepreneur is running around doing admin-type functions to make the business legal and work, she also has to focus on hitting certain agreed metrics and targets. Metrics and targets that she used to convince investors to swell her bank account with coin. But, alas this is really and truly the hard bit. She is on her own and there is no turning back.

 

Dead in five months!

 

She promised a bumper payday and she has to deliver. And the next 12 weeks are torture. As she works out where and how to spend her money to hit targets, get traction, produce sales and attracts users or customers, her cash pile starts to reduce and the brutal reality kicks in… “I could be dead in five months!”

 

Like a zombie

 

So what does she do? Well, she starts to act like a zombie as the zombification process sets in. Her communication with her investors tails off. She does not share her frustrations, insecurities, fears and worries with her team. She starts to feel all alone and even lonelier as she knows that she should ask for help, but cannot work out how to.

 

Her thought processes turn to mash and while there is still some glimmer of hope that she can pull it all back on track, she cannot face the reality that in essence, she has no idea how to run a business. In effect, she is already a zombie and will not get second-stage funding.

 

My shout out to anyone who has raised investment is make sure you avoid zombification. Enlist the expertise of your investors, mentors and anyone who you think has a brain. Be honest and communicate. Brad Pitt won’t always be around to save the day.

 

A Blockchain mindset

Blockchain, crypto-currency

 

It’s time for founders and startups to get real when it comes to managing their investors…

 

I’ve spoken with oodles of investors recently. Before this I spoke with and indeed interrogated a whole raft of startups. What I wanted to get to was the truth about startup founders and their relationships with their investors. What I found was astonishing and needs to be fixed.

 

something happens once the deal is done and the startup founder is off and running.

 

Initially when investors speak to startups, the startup founders love the investors. I guess it’s like dating and the startup founder has big puppy-dog eyes. The investors just love this and lap it up. After all, they need to really like and have respect for each other as one is selling equity in its company while one is purchasing that equity at an agreed valuation. A valuation that is generally based in assumptions, comparables, due diligence checks and some bullshit. But, something happens once the deal is done and the startup founder is off and running.

 

The “long-lasting relationship” becomes a one night stand

 

For some reason, the investor relations part of the equation falls by the wayside and the founder no longer has puppydog eyes. What should have been a long lasting meaningful relationship in essence becomes a one night stand. And this has to stop.

 

The Blockchain and all that it encompasses is built on trust. In short, our lack of trust in each other means we need contacts and legals to make things tight. Blockchain creates more certainty in anything that it is applied to. Which is why it is so prevalent in crypto-currency. Blockchain mindset means a cementing of trust that is immutable. All the relevant players on a specific Blockchain all sign up to the trust element. This produces the key and the security code. And this is what is needed in the realms of startup funding. In short, a whole lot more honesty… from all sides of the table.

 

Founders who have taken in cash need to be open and honest about themselves, the right team, where the business really is and what is keeping them up at night. If this means telling the investor that they are stuck then so be it. Investors on the other hand need to be more willing to understand the founder and where the business is. In most cases you will get bad news or news that does not correlate with the forecast. It is at this time that the founder needs you to enable and not berate or criticise or generally give them a hard time.

 

If we could develop a Blockchain mindset in our startups and our investors then so many more ventures would succeed.

How to get the best from your Facebook ads

Facebook, DIY

 

The Facebook Ad platform is an increasingly popular tool for entrepreneurs and startups because of its relative ease of use, accessibility and customer reach. However, it can quickly become a drain on your all-important finances if your ads don’t perform the way you need them to. Fortunately, there are a few things you can do to get the best from your Facebook ads without breaking the bank.

 

 

Understand your customer’s pain

 

Before you even think about placing – and paying for – an ad on Facebook you need to know who your customer is and what “pain” they are feeling.

 

I’m not talking about the kind of pain that is solved by popping an aspirin (unless, that is, your company sells aspirin). I mean what excruciating problem is your customer facing that your business can solve – what is your customer’s “pain”?

 

Have you done enough customer research to really get to grips with your customer? How do you know it’s enough? Quick tip, it’s definitely not enough if:

 

  • Your customer research is based on feedback from friends and family
  • You are your own target customer so assume everyone “like you” has the same pain
  • You’ve asked “a handful” of potential customers
  • You have relied solely on desk research

 

To get the best from your Facebook ad you’re going to want to know more than just simple demographics (ie gender, location, age). While those things are important for your targeting (more on that later), your ad message needs more refinement based on the things that stress your customer out, what annoys them, what makes them happy, what do they need help with, what they are searching for?

 

You’re a startup founder with limited cash to throw around, don’t waste it pushing ad messages that don’t resonate with your customers. Spend the time doing your research at the outset and get more bang for your buck.

 

 

Image over text

 

Okay, so you’ve done your research and you know that your customer is desperate to find a product that can help them with x, y and z. Lucky for them, x, y and z is exactly what you offer.

 

So, you design a graphic, including your brand name, with some bullet points about features and benefits of your awesome product. It’s perfect – it has all your brand messages and it looks great, really professional. Your customer is going to love it – you’ve even tested it during some of your face to face customer interviews and people have told you they love it. It’s a sure thing, right?

 

Wrong.

 

Facebook is pretty specific about what kind of content it likes, and what it doesn’t. You may have noticed when adding some of your images to Facebook’s Ad Manager that a little exclamation mark appears beside them warning you that the content may limit your ad’s reach.

 

This is down to Facebook’s 20% rule. Previously, if an ad image contained more than 20% text then Facebook would reject it and the ad wouldn’t run. That rule has relaxed slightly in the past couple of months, with Facebook now generally approving the content but restricting the number of times the ad is shown. Either way, if you want to get the best out of your Facebook ads, keep text to a minimum.

 

If Facebook decides your ad contains too much text it will restrict the amount of people who can see it.

 

 

 

Target carefully

 

It’s all too easy to fall down the rabbit hole when using the targeting tools in Facebook’s Ad Manager. You’ll probably have an idea of the demographics you want to reach regarding location, gender, age group, income bracket etc. However, there is so much more to choose from and instinctively you’ll want to add as many interests and behaviours as you can possibly think of which may be relevant to your business. Be careful.

 

Facebook’s default setting is for your target audience to be interested in AT LEAST ONE of the options you tick. You probably start off with the best of intentions – let’s say you are Moonshot and you want to target entrepreneurs, so you tick the “entrepreneurship” box. So far so good, right? But then you continue to target lots of other interests you think are relevant to your customer: “startups”, “investment”, “Dragon’s Den”, “Marketing”, “Recruitment”, “Sales” …

 

customer insights Facebook targeting
Keep your audience relatively broad to begin with and use your results to increase focus.

 

Do you see what’s happened? Now, I’m not only targeting people who are interested in “entrepreneurship”, but also anyone who is interested in “recruitment” (and possibly NOT entrepreneurship). My train of thought has led me down a path that looks like I’m increasing the size of my relevant audience, but actually I’m just targeting people who probably aren’t my main customer.

 

One way around this, of course, is to change the settings to include everyone interested in “entrepreneurship” AND one or two other things. However, be careful not to go too niche too quickly or you risk missing out an entire audience who would be interested in your product (for example, if I’d chosen “entrepreneurship” and “Dragon’s Den”, I may miss all the people who are interested in one and not the other).

 

The best target audience for your business is specific to your business (funny that). Keep your ad targeting relatively broad to begin with – selecting those who have an interest in AT LEAST ONE of two or three very closely related topics. Run the ad with a modest budget for about one week and, once your ad has finished, review the data and find out more about those who engaged. That way you can refine your target audience demographics specific to your business based on solid data.

 

 

Beware the Boost

 

I’ll delve into this in more detail in another blog, but suffice to say Facebook Boost is to Ads what McDonald’s or KFC is to gourmet cuisine. It’s fast and easy, but not necessarily good for you and you may not like the results.

 

A Boost can be useful if you’re trying to encourage more engagement with one particular piece of content (for example, you’ve developed a great video and want to encourage more shares, likes, comments etc).

 

However, if you’re trying to drive traffic to your website or encourage customers to submit a form (or some other means of lead generation) then it’s important your run a specific ad.

 

Not only is an ad geared to deliver on your goal (ie lead generation, website traffic, ecommerce etc), but it also allows you to be more targeted with your content and there’s no need for it to be shown to your existing customers (especially useful if you are running an introductory promotion suitable for new customers).

 

Facebook Ads with specific action buttons are better for encouraging customers to visit your website, while Boosts are used to increase engagement with specific content.

 

Facebook is fast becoming one of the most powerful advertising platforms in the world, but it’s not a magic wand. Do your research, understand your customer, test your ads, check them against Facebook’s own guidelines and beware of lazily boosting your content hoping it’ll generate leads. Your marketing budget is precious, avoid wasting it as much as you can.

 

 

Altitude sickness: are you prepared to scale?

challenge, scale, altitude, grow

 

Clint Eastwood starred in the Eiger Sanction many years ago.  It’s a pretty good movie and although not recent, it is worth tracking down.  In the movie, Eastwood is gearing up for a big climb.  One of the biggest – The Eiger. A great deal of the movie focuses on him getting prepared for the climb.  He has to get physically fit.  This involves exercise and lots of running.  He has to re-skill himself in the art of knots and buckles and all things mountaineering.  And finally he has to acclimatise himself as the air at that high altitude is thin and he needs to be able to operate there with his mind and body under stress.  It’s a bit like growing or scaling a business…

 

doomed from the get go

 

If UK startup founders don’t prepare to climb the Eiger, then they are doomed from the get go.  If you follow my blog posts you will know I have been banging on about why startups founders are not growing from Corbett to Munro to the Eigers of this world.  It’s short-termism and a lack of understanding what it takes to be fully prepared for what is ahead. The evidence is there to see.  Only a handful of founders are actually making it to next round investments, breakevens or big milestones. There are a number of reasons for this, but let’s focus on a couple.

 

seasoned investors actually wish startup founders would ask for more cash

 

A big number, in fact a huge number of startup founders do not understand what burn rate means.  Clint Eastwood did.  That’s why he trained hard to skill up.  It’s so easy to get carried away spending cash, trying new things and hiring in new people, without truly understanding the full monthly costs of these and how they impact the bottom line.  I have witnessed many startup founders who raise a wad of cash – say £150,000 – then have no clear path up the hill.  The have perhaps mugged off a few investors telling them that the cash will last for 18 months. But the reality is that to scale from Corbett to Munro, takes a lot more than they bargained for.  I’ve heard so many times from seasoned investors that they actually wish startup founders would ask for more cash and be more realistic.

 

founders are actually terrified of what is next and hide in their own areas of strength

 

Secondly, and perhaps one that many of you may find a little perplexing, is that many founders are actually the reason the startup fails to grow and make it to the Eiger.  Who would have thought it, eh?  The founder is the baddie who actually kills off the trek up the hill half way there.  Why does this happen?  Much of the time it not the business idea or the product that is validated and created.  It’s the founder who cannot keep up.  Keep up with the pace of carnage that is and will take place within the startup as it begins to scale.  Added complexity, new personalities in the team, dealing with investors and lacking that flexible ambidextrous mindset that can move between science, data and analytics to gut feel, instinct and intuition, causes meltdown and an imploding of what could be pretty special.  Many founders are actually terrified of what is next and hide in their own areas of strength to avoid facing the facts that they are not coping or do not want to prepare for the big changes taking place and ahead.

 

It’s a big old hill

 

It’s easy to work with a single spreadsheet that the founder is comfortable with.  It’s easy to micro-manage a small team of two or three as a founder gets started.  But the rules of the game and the toughness of the climb kick in when new altitudes need to be reached as the startup becomes more scale ready.  This is when our UK founders require to take a leaf out of Clint Eastwood’s Eiger sanction preparation.  It’s a big old hill and it takes mindset preparation, teamwork and a willingness to get uncomfortable.

 

I think we need to be a bit more honest and dare I say it – forthright – in how we mentor and prepare new and existing founders for the Eiger.  Otherwise, we do them no favours when they get altitude sickness.

 

Short-termism is killing startups – it’s time we grow up

 

It’s a fact… not enough businesses are making it in the startup world.  There are plenty starting in all sectors with great ideas.  There are a shed load of incubators and accelerators, support vehicles and consultants, but still only 33% of startups who get initial seed funding are making it to Series A rounds.  It should be much higher – right?

 

So, what is the problem?  Why are UK startups not cutting the mustard?  Why are we not creating more Moonshoters? It’s staring us right in face.

 

It’s called Short-Termism.

 

Only 1 in 10 startups that obtain seed funding go on to secure later stage investment

 

Having worked with thousands of startup founders who work hard to secure that golden egg of £150,000 in a first round of funding, I am amazed at the small, in fact tiny proportion, who then go on to raise the next round and grow.  I can honestly count on my two hands those who have nailed next stage finance.  It gets worse… This is backed up by recent research that shows that 1 in 10 firms that obtain seed funding in the UK go on to receive later stage fourth round investment, compared with nearly a quarter in the USA.

 

startups were formed at a record pace of 80 an hour last year

 

Entrepreneurship has become quite trendy. Having co-founded Entrepreneurial Spark in the UK, five years ago [I have now moved on from this], I see there is a huge appetite for people starting businesses.  So much so that NatWest has powered Entrepreneurial Spark to 13 hubs in the UK, each of them rammed with hopeful founders.  This, like many programmes out there is to be applauded, especially NatWest, who are putting their money where their mouth is.  Giving new start founders the opportunity to just crack on is a good thing.  Techstars, The Bakery and so many other startup outfits all create a healthy ecosystem.  StartUpBritain has completed research that shows startups were formed at a record pace of 80 an hour last year. Wow!  So, how is short-termism killing off so many of them?

 

The startup surge has created a race to the bottom

 

Imagine if you will, an architect designing a house.  She will ensure the foundations are solid and all the load bearing beams are built to cope, while plugging in all the services that the house needs to become a home (eg electricity and sewerage).  The structure will be built to a specification that is built to last.  It is built not for fun or to be sold, but to last.  In short, the architect is building for the long term with all that entails: multiple owners, weathering and wear and tear.  Unfortunately, our startup founders in the UK are not thinking like the architect.  We have too many building their ventures as quickly as they can – to sell. This is key in determining why so many are failing to make it to round two and three of investment.  Along with the surge in startup activity, there has been a race to the bottom in making investment the Holy Grail.

 

create more business builders than startups

 

It’s time to re-think and re-imagine how we build new start ventures and founders who can think more long term.  It’s time to create more business builders than startups that are not built for short term investment.  “Business Building” may sound a bit old hat and not so sexy.  But alas, it is what it is and while startup is a genre or movement, Business Building is the new black!  It’s time to focus on post investment execution, albeit the pre-investment validation was sound.

 

Once the funding is in, the real work begins

 

Execution is where the battle is won or lost.  Once the funding is in, the real work begins and you have to make it work.  The problem is we are not teaching our startup founders how to run a business, how to execute.  A startup is basically a bunch of capabilities and an idea all crashed together like mashed avocado.  But founders needs to flip out of fund raising mode and put on their big boy pants and run an operation to a point where it has some operating rhythm.  But, we have a generation of founders who cannot get to grips with this, not grasp how significant this is to them living or dying.  It’s a failure that can be avoided with some real thought and action.

 

Investors are also looking for more rounded founders

 

Short-termism is a mindset that we all need to bring to life for new founders who are in “build my startup to get investment” mode.  Investors are also looking for more rounded founders who they believe will make it, at least to the next round.  They of all people want to see their investments succeed.  So, whether you are starting, have started or are working with a startup, think about the founder and her potential to skill up to run a business and not simply get a badge for bringing in seed investment at the SEIS cap.

 

It’s time for our startups to grow up.

 

Listen to your customers – don’t get trapped on Fantasy Island

Corkscrew roller coaster

 

Boss, the plane, the plane!!  Yes it was these immortal words from Herve Villechaize aka Tattoo to Mr Roark on the programme – Fantasy Island – that I always knew would lead to a good story.

 

At a luxurious, but remote tropical island, the enigmatic Mr Roarke would make the dreams and fantasies of well heeled guests come true.  Money was no barrier and what the guests thought would be a terrific fantasy on many occasion turned out to be anything but.  Usually, as with all fantasies they had not thought it all through, so different circumstances and outcomes would pop up and surprise them.  This then got me thinking about people who start businesses from a laptop and a spreadsheet and create their own fantasies.

 

this is where the conversation became a little strained

 

I once had a guy  – who we will call an ‘entrepreneur’ as he told me he was one so I had to believe him – tell me his business was valued at £20 million.  Great news I thought as I studied him.  Can you tell me all about it and how many staff you have.  Tell me about the profit you make and your plans for growth.  And this is where the conversation became a little strained.

 

He pulled out his MacBook Pro and opened it up, where I was presented with a spreadsheet.  Now, I’m not a big spreadsheet fan, but I sat and had a good look at it all the same.  The spreadsheet outlined a £4M profit in year three.  It showed explosive growth in customers using his mobile App.  I must say it all looked good and most plausible on a laptop screen.  But, when I asked him some questions about the £4M profit, I ended up with more and more questions.

 

With not one customer at that time, this ‘entrepreneur’ had created his very own fantasy that would have fitted well into an episode of Fantasy Island.  He was convinced beyond reason that his early adopter customers would jump at the chance to use the App and that the money would tumble in thereafter.  I could see Mr Roarke and Tattoo shaking their heads behind the scenes as this fantasist in front of me was living in a world of make believe.  I suggested that he go out to a friend of mine who would be a model customer for his App.

 

the grim reality of facing a customer asking hard questions

 

A few days later I got two rather interesting phone calls.  One from my colleague who told me that the ‘entrepreneur’ was deluding himself and one from the ‘entrepreneur’ telling me that my colleague had been rude and did not understand how the App worked, so dismissed it.  Oh dear, I thought, the grim reality of facing a customer asking hard questions of your wonderful spreadsheet that is in fact, a fairy story or fable.  Suffice to say, the ‘entrepreneur’ with the £4M profit business in year three is no longer and in fact had disappeared into a black hole, despite me suggesting that he keep talking to customers to get more feedback and insight.

 

the best way is to co-create the business with customers and be prepared to pivot

 

This approach is typical of many who startup and get seduced by spreadsheet madness.  A zero here and there is easy to add into the spreadsheet and this is where it moves from reality to fantasy.  I’m not going to stifle anyone who wants to start a new business – far from it.  But, I would suggest from experience that the best way to do this is to co-create the business with customers and be prepared to pivot and swap out staff.  As I tell people who apply for the Moonshot Academy, there is no point in starting out with the wrong people taking up precious seats in the spaceship.  It only adds to the load.

 

Co-Creation with real people who you believe will buy your products really helps with product/market fit.  It is very different from the Fantasy Island approach on a spreadsheet, where Mr Roarke and Tattoo will allow you to live out your fantasy of being an entrepreneur for the day.  There is nothing wrong with talking to people about your idea.  Trust me it is where you gather your best insight…

 

Stop being a startup, become a business builder

 

Moonshot business building

 

Business is the beating heart of a country.  Whether it’s selling mangos at the roadside, building an Internet of Things startup or operating in a large corporate.  Business, as all politicians from all persuasions will tell you, is vital to the success of economies.

 

You’ve heard it all before – right?  Business creates jobs for people.  It gives people purpose and gets them out of bed.  It pays HMRC taxes and in some cases contributed towards pensions.  Business is essential and it is everywhere.  Train franchises to farmers to airlines to grocers to ecommerce to newspapers.  Every country has programmes in place to support business and encourage people to enter – startupland.

 

The UK has many such programmes.  But, something is missing…. And if we don’t take action, it will kill off the next generation of business builders.

 

much of what we have out there supporting these “startups” in startupland is not hitting the spot

 

I’m being pedantic here in my language and proactively referring to people starting businesses as business builders.  It’s time to re-frame the lexicon that has creeped in over the past decade where firstly startup and then scale up became the sexy words that encompassed business and indeed entrepreneurship.  Startups are everywhere and we have shed loads in the UK from Edinburgh to Manchester, Birmingham and London.  But, much of what we have out there supporting these “startups” in startupland is not hitting the spot.  Too many of them are still failing and still not making it.  There are multiple reasons for this.

 

Short termism permeates startupland

 

First off the bat is the short termism that permeates startupland.  I see it all over the UK.  Startups who are jumping onto the investment travelator and whose stole purpose in life is to get investment.  It’s all about the funding and that’s why they then dive bomb once they have brought it in.  Ostensibly, they are building a model that is attractive to investors, whether they be family and friends or high net worths or angel syndicates.

 

it may be more prudent to ask them, how they are going to run the bloody business

 

But, all the questions are wrong, it could be argued.  Instead of asking these newbie startups who have just come into startupland, what their exit strategy is, it may be more prudent to ask them, how they are going to run the bloody business.  It’s everywhere, startups creating three minutes pitches, business plans and investment decks showing potential investors the big pay days they may get.  But, these newbies in startupland don’t have a scooby doo on how to actually run a business.  Therein lays the first problem.

 

Secondly, our startups don’t understand what “timing” means.  Timing is crucial when starting a new venture, seeking investment and building a business.  Let me give you and example here.  Internet of things [IOT] businesses are trendy just now.  I spoke to a young startup recently who is developing an umbrella that uses photovoltaic energy to power your iPhone while it’s up. It can also Bluetooth stuff from your smartphone while interacting with beacons etc as you walk.  Pretty impressive stuff.  But, if this idea had been put out 5 years ago, it would have been too early.  The flip side of this is coming to market too late and trying to create the next Facebook.  Timing is key to understanding when investors invest and where they will be and where your service or product fits.

 

We have too many solopreneurs

 

Thirdly, despite all the signs and signalling from the USA, VCs and all the support out there, we just do not have enough teams.  We have too many solopreneurs, who cannot or do not have the capacity or nous to co-create a business with others.  Trust me when I tell you this is really tough and it requires you to think and act differently.  Team formation at the leadership level is crucial to potential success.

 

Having a co-founder is also a big plus point.  Whether it’s serendipity and you stumble across each other and hit it off with the same vision for the idea or whether you have to actively go looking, a great co-founder speaks volumes to investors.  It is the team that will execute.  It is the team that will think things through and overcome.  It is the team that will pull through when time are really tough.  It is the team that co-creates and has that emotional buy into progress and success.  But alas, we do not have enough startups in startupland who can pull this off.  And it is having an affect right now on how startupland is functioning.

 

think about you, your co-founder and team as business builders

 

Finally, and I could go on a bit on this rant, we do not have the mindset of business building.  As I said earlier in this piece, startups are looking too much like short term bets.  Forget labelling your self as a startup or scale up and think about you, your co-founder and team as business builders.  It’s a mindset change and one that is overdue in Scotland and beyond.  So, I would encourage all those involved in supporting businesses to re-purpose support and thinking into a longer term approach that puts Business Building at the forefront of a startup’s mind.

 

It’s perhaps time to take a step back and re-examine how we as a nation as helping to create our new business builders, after all….. business is the beating heart of a country.