Starting a business is exciting and liberating. It is also hard and risky, and a profession in itself. Here are some ways to get help, support and advice, and our take on where each is useful.
An incubator is a physical place to run your business, with many other start-up companies. You can stay as long as you need to (and can pay!), or until your business has outgrown the space. Mentorship is typically provided by investors and by your start-up CEO peers. The idea is that as a result of being in the incubator for 18 months you will know if you have a business model that is scalable and repeatable versus others who will go along for two to five years plugging along, but not getting any traction. Be aware though that sometimes sharing space with other companies is not always a plus, especially in long term incubators that may be carrying dead weight of under-performing companies.
Worth it if…: You have a clear idea of market and proposition, and need flexible shared space to start operations. The good incubators have a selection process for readiness and fit. Don’t forget the revenue model of incubators is based on rentals. Incubators are landlords at heart.
Accelerators make a (small) investment in their companies in return for equity (part ownership of your company). Like an incubator, they also put companies through a program to fine tune their businesses, but your time in the space is typically limited to 3-4 months, to jump start your business and then kick you out of the nest. Coming out of an accelerator with a good reputation is like a vetting process. Investors tend to take you more seriously. As an example, one of the best accelerators in the world is Ycombinator. They have invested in Airbnb, Reddit, Stripe and DropBox.
There are disadvantages though. Accelerators can be distracting, with lots of related meetings and events with mentors and investors, getting in the way of focusing on your own project. They can also be confusing, getting 10 different opinions from 10 different mentors.
Finally, and most importantly, you don’t just walk in to an accelerator. You have to apply and really know your model, market, and how to speak to investors. Not many companies get in – less than 5%. So you need to prepare well.
Worth it if…: You have an innovation driven high potential venture where your investing equity partners can see and believe in a significant return. You’ll need to have been through some education of the latest techniques in entrepreneurship, talk the language, understand the processes, and have taken your idea to a minimum viable product.
Entrepreneurship is a profession, and one that has changed hugely in the last 7 years or so. Surgeons don’t learn on the job (imagine!!!!), and neither should business owners. One of the reasons accelerators are so popular is because they provide entrepreneurship education. The idea is to learn in 2 months what would otherwise take 2 long, painful and expensive years otherwise.
For example, a recent analysis of 101 post-mortem essays by start-up founders found that 42% put their failure down to there not being a market. When you learn Entrepreneurship, you learn very early on that the first thing you test is the market, and you don’t have a business to fail without it.
Many people think because they come from a corporate background, they already have the training. Unfortunately not. A small company is a very different place. In the words of Ben Horowitz, cofounder of Andreessen Horowitz, a Silicon Valley venture capital firm:
“When you run a large organisation, you tend to become very good at tasks such as complex decision-making, prioritisation, organisational design, process improvement, and organisational communication.”
On the other hand, “When you are building an organisation, there is no organisation to design, there are no processes to improve, and communication with the organisation is simple. On the other hand, you have to be adept at running high quality hiring processes, have terrific domain expertise (you are personally responsible for quality control), know how to create process from scratch, and be extremely creative about initiating new directions and tasks.”
He goes on to describe how corporate execs have their work ‘incoming’. They have a huge amount to deal with without starting anything new. In contrast, when you are a start-up exec, nothing happens unless you make it happen. It is a different skill set and a different approach.
An Entrepreneurship education will give you customer engagement techniques, how to bootstrap (start a business without finance), how to talk to investors and a lot, lot more. Bottom line is a small investment early pays back hugely in time, money, and a raised chance of success.
Worth it if…: You don’t have it already!
A bit of a post script here. A lot of new thinking has been published on Entrepreneurship in the last 7 years. It is, as I said, a profession. As such, it is always good to keep up with the latest ideas and trends. You will get knowledge and techniques, but be aware just because you have read an idea doesn’t mean you can carry it out, something called the knowing-doing gap. You need a good basis of entrepreneurial education first.
Secondly there are thousands of books in entrepreneurship, each with a focus on a specific element. A few hundred are great, and others have an important bit of guidance that could be relevant. A lot have been written in the last decade as the field of entrepreneurship has evolved. So where do you start? One way is to start with articles, which often refer some good books.
A note of caution. In a Forbes Article titled “Entrepreneurs: Invest Your Time Wisely“, Jeff Skinner from London Business School writes
There are loads of authors out there peddling proprietary potions. For some it’s all about business planning – the ‘canvas’ being the latest manifestation. For others, the panacea is the ‘prototype’ and a ‘minimum viable product’. Or, a burst of intense stakeholder engagement resulting in swivels and pivots. Could it be about team-building? Or, storytelling (the successor to the pitch)? Or, those first dozen users?
“I talk to dozens of aspiring entrepreneurs each month. Many of them have read the books and emerged bewildered by the smorgasbord of mutually exclusive – but plausible – advice. Somehow they must be elevated to a higher plane – so that they can figure out what’s really important for their putative venture. And then – and only then – decide which tools (aka authors) are fit for purpose.”
In other words, get some help. Which is really what this whole article is about.
When Banks lend you money they have an interest in your success. Some banks are looking at this seriously and offer to signpost to education support (such as Santander) or look to offer tools to help (such as Lloyds).
However, these are produced from a bank’s point of view. For example, the first thing Santander tell you to do is a detailed business plan. This is received wisdom, and horribly out of date. It is fine for a bank who want to make themselves feel like they are taking less risk on you because you have a nice spreadsheet with nice figures on. But let’s be honest – this is fiction. It won’t last past the first conversation with the first customer.
Worth it if…: Our honest opinion – not really much help here, and could easily make you do the wrong things. Sorry banks ☹.
A post script on funding. Don’t pledge personal collateral for a loan. There are other, better ways of funding a start-up, and testing whether someone else will put money into your idea is a great way of seeing how viable it is. On the other hand, if you have an idea that is hard to fund via equity, British Business Bank funds start-ups where financing through normal market functions doesn’t work well.
In some parts of the world, entrepreneurship is exploding, and London is one of those. There are lots of opportunities to meet other people thinking about starting their own business and get tips and connections. Makes you feel good too.
Be aware that mostly what you get at networking events are other people doing the same as you. Not customers. Not experts. And presentations are usually tasters moving to a sale. So choose your networking carefully, and don’t have high expectations.
Worth it if…: You use them efficiently and don’t have high expectations.
These could be board members, an advisory board, mentors or Business Coaches.
- A board of directors makes decisions, on behalf of the stockholders, for good of the company.
- An advisory board doesn’t have any official authority. It is a formal collection of mentors.
- A mentor brings knowledge, skills and experience.
- A business coach helps an owner clarify the vision of their business and how it fits in with their personal goals through a coaching process. They may well not be business experienced.
The point of an advisor is to help you grow your company. They do that by protecting you from your blind spots, giving you different perspectives based on experience and connecting you with their own networks. They are there to help you see the bigger picture and warn you of risks you might have missed.
The questions you should ask in recruiting advisors include:
- Do they have experience with start-ups?
- Do they understand your market?
- Do you connect with them?
- Do they offer the expertise you need?
If you are fundraising, your board should include representation from the funder.
Advisors are always useful. However, be aware that by definition they are hopefully busy themselves. They can provide advice and help with decisions, but you need to build the business, run it, and structure it in the right way. Advisors can’t and won’t do that for you.
Worth it if…: You should certainly have them. But they have to be the right ones, and you need to understand their role and limitations. Don’t expect them to run the business for you.
The impact of different types of support for the Entrepreneur.
|Stage||Networking groups||Books||Entrepreneurship education||Incubator||Accelerator||Bank||Advisors|
|1. Check out the possibilities and make useful contacts||Medium||Low (handy knowledge to talk to people about)||Medium||Too early||Too early||None||Low (A good mentor)|
|2. Understand how to start a business and save yourself a lot of time and money||Low (Some good advice, some bad, very little actionable)||Low (it is always good to keep up to date, but knowing is not the same as doing)||High||Too early||Too early||None or negative||Low (A good mentor)|
|3. You have a business running with income, and want to work with like-minded people||Low||Low||Low||High||High||None||Medium|
|4. Your business is in the top 5%, you are a professional entrepreneur, know exactly how to talk to investors and need investment||Low||Low||Medium||Low||High||None||High (a good board)|
|5. You’ve outgrown the start-up phase and have a fully self-sufficient, systematized company||None||Low||Medium||Outgrown||Outgrown||Low||High (a good board)|
If you are considering starting your business as an alternative to your current work, come and learn from best instructors in this business. Taught by executive education and entrepreneurial faculty from London Business School you can either
Crafting Your Entrepreneurial Opportunity
A one day Start-up bootcamp to create, refine and take the risk out of your new business idea
You should consider this if…
You are evaluating starting your own business, not sure of your idea and whether entrepreneurship is you best choice outside of employment
Developing your Entrepreneurial Business
A once a week, 8 week staged journey to convert your idea to a real business
You should consider this if…
You have a business idea, and are keen to develop it into a business by focusing on the right set of customers, develop the product that is the right fit for the market and its paying customers. And you want to do so by avoiding the most common mistakes naive entrepreneurs make.
Read the next article: http://changeschool.org/a-good-idea-for-my-business/
Held in London, the 1-day bootcamp and 8-week workshop have been designed for working professionals, and delivered by faculty who have not only helped grow businesses at King’s College London, London Business School, UCL, LSBU (Entrepreneurial University of the Year, 2016) in the UK and also a number of universities, institutions, and governments abroad.