“O2 recently came on board as our big business supporter. I for one think that their superb business strap line, “we’re better, connected” reflects our beliefs about early stage businesses. Their financial backing will allow us to connect with a new generation of businesses through a major expansion of accelerated business training for entrepreneurs online.” — Doug Richard

Simon Devonshire, Head of Small Business Marketing at O2, is a guest on today’s blog.

Schools for Startups is an impressive initiative which will no doubt motivate and inspire entrepreneurs. Doug is an especially talented and thought provoking presenter and business coach. The content of his lectures is about helping businesses to grow which I believe is relevant to all businesses. Doug makes a phenomenal difference to the thinking and performance of small businesses and we’re proud to be on board to support the creation of additional online training programmes targeting entrepreneurs.

We know that access to good quality training can be difficult and expensive for new businesses who are just getting off the ground. That’s why it’s so great to see School for Startups filling the gap.  Enterprise creation is so important for the recovery of the UK economy, and small business sits at the heart of entrepreneurialism. Being able to access expert training and advice for free online at a time that suits them can only help young enterprises continue to flourish.

But it’s not all about O2 & School for Startups sharing our support and experiences. It’s a two-way relationship. We want to learn from entrepreneurs and help our business customers to grow their business. More small businesses do business with O2 than any other network. If we are to continue to be there to support them every step of the way, we need to make sure we understand the ongoing challenges they face in the ever changing modern business environment.

One thing O2 well understands is that entrepreneurs and small businesses absolutely rely on flexible communications technologies.

Many businesses these days launch and run for years in a ‘virtual office’. Owners, key employees and strategic partners spread across the UK. When customers call, they need to feel the coherence and cohesion of a traditional brick and mortar business even when one doesn’t exist.  Web hosting, e-commerce, cellular internet connectivity, broadband wireless, various forms of VOIP, small businesses now require the kinds of service and support that was available only to multinational corporations less than a decade ago.

Doug Richard’s pragmatic advice on launching ‘ultralight’ businesses with little or no outside funding is, we believe, founded on bedrock of a telecommunications company that provides a truly tremendous number of ‘just in time’ services for entrepreneurs.  O2 and School for Startups share a single vision for  entrepreneurs in the UK.  Speed, agility, flexibility, insight, value . . .  Like O2, School for Startups is determined to give them the tools they need.

We look forward to the opportunities that this partnership will bring for us to work more closely with startups and are committed to supporting Doug in championing entrepreneurs and new business in the UK.

– Simon Devonshire

We mention in passing . . . O2 has launched a ‘Joined Up’ communications service, which extends beyond its core mobile offering. The new services provide businesses with one single converged solution for their telecoms requirements spanning mobile, fixed line, data, broadband communications, equipment and professional consultancy.  It gives businesses of all sizes an opportunity to outsource their telecoms, ICT and consultancy needs to just one provider, reducing the amount of time spent handling and managing systems and communications services, which are not core to their business.  Find out more.

Related posts:

1. Naked Business: Building a Wall of Sound
2. Press Release-Doug Richard to Teach UK Entrepreneurs How to Start and Grow a Business at Newcastle University on February 3
3. The Naked Business: What We Get Right

While those under fifty often give starting a business serious consideration, many fifty and over think entrepreneurship just isn’t an option for them. No matter how much they may have wanted a business in their youth, somewhere around fifty they arbitrarily decide that they are far too old to have one.

• Some think that working to get paid more in their current job must be easier than starting a new enterprise.
• Some believe that finding a new job that pays more will be easier than starting a completely new business.
• Some consider it wise to have a job that offers retirement benefits, even if it doesn’t pay well and the projected retirement benefits will be insufficient to pay bills in years to come.
• Others simply have no idea how they would go about founding a new enterprise and think they are far too old to learn.

If you are over the age of fifty, and you are letting age alone stand in the way of starting your own enterprise, I suggest you reflect on the following.

• People are living longer than ever. Someone in good health who works hard to remain healthy, may expect to be fully functional into their eighties. Changes in medical technology may extend your lifespan even further. Spending almost half your life in idle retirement is a bit insane.
• Having a business, and the daily pressure to remain mentally acute and physically active, is good for you. Studies show that mental and physical exercise stave off most of the ill effects of old age. So allowing yourself to have a business may actually help you live longer.
• A good business provides value to your family as well as to you. If you increase the number of years you are productive, you may build resources that benefit people after you are gone.

Starting a business isn’t rocket science, and all other things being equal it is easier for those over fifty to create a successful enterprise than it is for the younger set. Older professionals have business, financial and personal life experience to draw on. They tend to be more pragmatic and better connected than their younger brothers and sisters. They also have fewer personal distractions since they rarely have infants and small children at home.

It’s Not All Roses

Older entrepreneurs do have some important issues that should address very directly before they start new enterprises.

• They should give the enterprises they plan to start serious thought before they invest significant time or money in them. Not all businesses are created equal. Some are just better than others. I have 20 questions I use to vet businesses I plan to start, because I know that businesses that pass my test make more money faster than those that don’t. Youngsters can work long hours at minimum wage to build an enterprise based on a bad business models. More mature business professionals should be smart enough not to.
• They need to frankly assess their health and their requirements for exercise and reasonable levels of stress. Whereas younger workers can afford to burn the candle at both ends, adults must make sure they do everything they need to do in order to remain fit. A healthy body and mind are always a good investment, and they are the single most important asset an older professional can give to their business.
• They need to be realistic about the financial life cycle of their business. Though I never tell people to start a business with a firm exit plan in mind, I do think older entrepreneurs need to give some thought, as they develop their enterprises, into how their businesses can run without them for periods of time and how they can monetize any equity or value they build in their firms when they decide to cash out.
• They must renew their personal and professional relationships. The most significant advantage that most mature entrepreneurs have over newcomers is the depth and breadth of their contacts. This is particularly true when multiple over-50 entrepreneurs find a way to collaborate. This opens up access to early sales and prompt financing on a very significant level.
• They should refrain from dumping their life savings into their business. They should avoid acquiring a great deal of debt to fund their business. Businesses are supposed to make money. If a business model is well considered, and it’s implementation strategic, it can almost always launch and become profitable with very little investment. Younger entrepreneurs can make the mistake of believing that financial success can be bought. More mature entrepreneurs must know better.

Ready to Get Started?

If you are over fifty and want to give serious consideration to starting your own business, here are some steps you can take to get started.

Start by making a list of all the assets and experience you can bring to a business. It may seem strange to start with a list of what you have rather than what you want, but creating this list throws off the tunnel vision that having a job and raising a family give most of us. By the time you are remembering what you did for a living when you were twenty, and which courses you enjoyed in school, you are also remembering who you know and what you know, and that’s an important thing for you to do. Writing this information down is also important. What we remember and ponder is ephemeral. What we write down is concrete and easy to reference.

Make a list of the things you enjoy doing. Good businesses are based on passion. Enthusiasm and expertise are your most important sales tools because most people enjoy working with folks who care, deeply, about doing something right. Don’t think about what’s possible, what’s rational, what is wise or what is practical. Think about what activities you enjoy day to day, minute to minute. Make another list of things you don’t like doing. You may hate accounting, but it’s a part of running a business. The necessary parts of a business that you don’t want to do must be undertaken by others. You have to know what they are so you can shop for help.

Start writing down business ideas. By the time you’ve completed the previous two operations, which will take days or weeks, you’ll have ideas noodling around in your head for things you might like to do that make money. You’ll have come up with ways you can be of service to others, and you’ll have some notions of people who might be willing to help you. You’ll be aware that some of your business ideas are things that won’t take much time and will make money. You’ll also have some larger ideas, requiring more of an investment and providing more of an income. By the time you’ve got twenty or thirty ideas on paper, you’ll have some you like better than others. Those are the ones you can begin to explore. Exactly what would it take to get started with those businesses? Can you find customers? Do they want what you have to sell them? I mention in passing that our School for Startup’s “Start Here!” classes are designed to help people who want to know how to vet business ideas before investing time or money into them.

The process may seem strangely loose and intuitive, given that business is always characterized as such a cut and dried thing. But the truth is that starting a business is about equally art and science. There’s no point starting a business you will loathe running. The best outcome from that kind of thing will be that you go out of business quickly so you can get on with something that you enjoy more that pays just as well or better.

As a very happy entrepreneur over fifty, I encourage my peers to join the entrepreneur revolution required to keep the UK wealthy and prosperous well into the next century. Innovation, invention, insight and good implementation can build a good business at any age.

Related posts:

1. Practical Q&A With Doug Richard: Mentoring, Recruiting & Seeing Opportunities
2. The Pitch 2010 – A Very Important Event for UK Entrepreneurs
3. UK Entrepreneurs Talk About School for Startups

Those who know my preference for investing in startups understand that I do so because startups are the best way to make little numbers turn into big numbers fast. In under a decade Google went from a few guys in a dorm room to the backbone of worldwide internet commerce. That is my kind of business.

The Challenge That Faces Innovators & Inventors

Because I invest in startups, I often work with those who imagine the details of a better world. Often their business ideas are about far more than making figures on some ledger spiral up. In fact, I would call the best of them visionaries, philanthropists and idealists.

They are all about clean water, safe kids, new ways to socialize and entertain, new solutions for transportation, energy and food production. I admire these people, and I enjoy working with them. I enjoy seeing the world through their eyes.

But when it comes to business, I must say that having an objective that is not based on simply increasing profit as quickly as possible often slows or stalls a business’s financial success.

People with a “plan to change the world” often get rather stubborn about how they want things to happen. They frequently want to make people like their product, as they envision it, as they produce and distribute it, and as they price it.

That is a somewhat take it or leave it mentality, and the market punishes it brutally.

I can be helpful to these professionals, when I am helpful to them, by finding good ways for them to listen to, communicate with, and respond to the market more effectively. Implementing a few simple strategies that streamline these important communication operations does a new business a world of good. With the right data coming in, innovators and inventors can often figure out how to achieve their basic humanitarian or technological objectives while making a tidy profit.

If You Want a Successful Business . . .

If you are just starting your business, or you have a business that is struggling, think hard about your objectives.

Personal objectives like “increase my profits”, “support my children” and ” pay my bills” are easy to reach. Non-personal objectives like “I want to help people find jobs” or “I want to help people care for their children” also work.

Objectives like “get rich quick from selling a super specialized widget that no one but me is smart enough to understand” is a non starter. “Become massively wealthy by making people buy this thing they repeatedly tell me they don’t want” also does not work well. The market does not like complex self-centric objectives.

Let’s look at Google again.

They had one simple objective. “Let’s make a database that lists all the websites on the internet.” All the other things they do now are things their customers asked them to do.

Simple objectives, simple strategies, simple success. That is what good startups are based on.

Are you starting a business? Do you have a business that’s struggling?

School for Startups delivers practical, pragmatic, instruction in how to launch and grow more successful enterprises. I hope you decide to attend one of our upcoming courses or online events.  We look forward to helping you succeed.

Related posts:

1. Living Without Air: Ship Early, Ship Little, Ship Fast
2. Practical Q&A With Doug Richard — Cambridge Starting & Growing a Successful Business Class
3. Choosing a Social Enterprise Legal Structure: CLS, CLG, CIC or Cooperative

What does your business do?

ThirdYearAbroad.com aims to inspire students to study languages at university and make the most of their year abroad. It’s such a fantastic and hugely valuable opportunity to speak a foreign language fluently, and yet it is very easy to be discouraged from going by the sheer amount of planning, organisation and self-sufficiency needed to make the year a success.

The year abroad is a complicated and often scary step which we try to make easier by providing students with ‘been there, done that’ case studies, city profiles, course reviews, language help, a discussion forum and advice for their worried parents. ThirdYearAbroad.com is a social networking platform where our users can share their worries, information, help and advice before, during and after their time away.

How did you decide to start it?

I studied Italian at university and spent a wonderful third year abroad in Florence, but I had endless difficulties in registering on my course, finding accommodation with local students and setting up a foreign bank account – especially as I didn’t know anyone else there to ask.

My home university hoped I would return completely fluent in fourth year, but they didn’t have the resources to help me until I was back, while my destination university grouped me en masse with all the other foreign students and left us to our own devices.

I didn’t know any students who had studied there and had no source of information to help me. I checked with friends and parents and discovered that this has been an ongoing problem over the years, so when I graduated I decided to set up the website that I needed while I was away.

What were your toughest challenges?

I’ve been really lucky and have had loads of help and startup advice from very generous people, but my business is solely based on the website so my most difficult and frustrating experience was being let down by my first developers after they’d completed 75% of the project. This meant I had to start again from scratch. I wasted a huge amount of time and money – crucial factors for a startup – but I learnt from my mistakes, treated the process as an expensive crash-course in web development and am very lucky that 3B Digital stepped in to save the day and have done such a fantastic job!

What sites do you recommend

• www.wexo.co.uk – I couldn’t have started up without the help of work experience students.
• www.ooh.com – I love learning new skills and this site offers every creative course worldwide I could possibly imagine, plus a few more!
• www.dailycandy.com – every day I receive one email with the details of something completely new, exciting and unique to do in London.
• www.springwise.com – the world’s most weird and wonderful new business ideas, all in one place.

Which entrepreneur do you admire most?

I worked for the founder of lastminute.com, Brent Hoberman, on his latest project mydeco.com, and was so impressed by the way he truly involves the entire team in decision-making and developing new ideas. If there are thirty creative brains in the room, why not use all of them every now and then, instead of always selecting a small team?! He was very inspiring.

Related posts:

1. Featured Entrepreneur: Nadeem Azam
2. Featured Entrepreneur: Brett Afshar
3. Featured Entrepreneur: Emma Jones

What does your business do?

Shopping Vouchers is an online retail lead generation business. We connect the retailer with the consumer using voucher codes, special offers and other sales enhancement techniques.

It’s great for the consumer because they get money off their purchase, and it’s great for the retailer because they attract new customers and increase revenue.

How did you decide to start it?

As individuals we’ve all been interested in business from an early age and using the Internet is a great way to start a business with very little upfront capital so it made perfect sense for us.

We noticed there was a gap in the market place and capitalised on the gap for a clean, easy to use money saving website where consumers come to save money and retailers can use to gain customers.

What were your toughest challenges?

The website relies quite heavily on search engine traffic and it took time and a lot of continuing effort to become established in the major search engines. We are receiving about 4,000 unique visitors a day at present and to get to this level was very hard, but we have an excellent team of developers always pushing us to the next level.

What advice do you offer to fellow entrepreneurs?

Cash is king. You should set out to be making money and be in profit from day one. To start an online business all you need is a computer and Internet connection so overheads are next to nothing. Having a good flow of cash from the start ensures projects run smoothly and can be done as well as possible without the need for major investment.

The main point for any business is just do it. If you have an idea then go for it. It’s hard starting you own business and it’s also high risk. But if you put your head down and work the rewards are worth it. A positive mental attitude definitely helps!

What sites do you recommend?

• Business Link is a very good resource for business in the UK.
• TechCrunch is very good for staying in the .com loop.

Which entrepreneurs do you admire most?

Probably Richard Branson, he’s got a great attitude to business and has lots of fun while he’s doing it. He doesn’t just stick to the safe option, he’ll go into any industry and innovate it.

On a personal note Ross Williams, our business partner who is a serial internet entrepreneur, has been a real inspiration and shown us the ropes.

Related posts:

1. Featured Entrepreneur: Nadeem Azam
2. Featured Entrepreneur: Lizzie Fane
3. Featured Entrepreneurs: Vinnie Morgan

What does your business do?

Azam Marketing www.azam.net is a full-services online marketing and design agency which unleashes the potential of the internet to grow our clients’ businesses.

A pioneer in the digital arena, our specialists have 102 combined years of experience in affiliate, display, email and search marketing. We also carry out website design and development, online business consulting, and corporate training.

Over the last 13 years we have developed over 70 niche websites and our mailing lists have now grown to over 5.7 million opt-in subscribers in the UK. We utilise these and our other means to generate millions of pounds a month in sales for companies large and small.

How did you decide to start it?

I have always been in business in some way, shape or form since I was nine years old. When I was a kid, I would work in my father’s Cash & Carry in Yorkshire after school and on the weekends, and at different stages in my life I have had businesses doing copywriting, selling computer games offline, selling books online, and providing IT support.

Due to some unscrupulous people, I was flat broke in 1997. One day, when I couldn’t even afford chicken and chips for £1.99, I told myself I have to sort my life out.

I have been glued to computers since my teenage years, being a programmer in the 1980s, and, when I investigated what the internet had to offer and realised it’s potential, I started spending 100 hours a week on the PC to build my digital marketing and design business.

What were your toughest challenges?

One of the first challenges was developing an internet business when I couldn’t afford to get online! So I enrolled on a course at my local college and that gave me access to their computer centre. I would be the first one there at 9:30am each morning and the last one out at 9pm every night. It was a challenge trying to code websites when the teenagers around me would be swearing and fighting all the time and flicking paper at each other past my nose!

The hardest part in the early years was surviving when I was not making any money. I lived off Tesco baked beans for years! It took me six months to generate my first sale online, which I think was an Eastenders book, and I made 68p profit. And then, when I’d grown the business, the dot.com crash happened in which my clients and advertisers collapsed like nine pins. It was like a kick in the stomach and the business had to go back to square one. But, by the grace of God, I survived all those difficult times and, today, 13 years later we’re in a healthy position and growing faster than ever. We tripled in size last year.

What sites do you recommend?

• www.bbc.co.uk/news – keeps me updated on what’s happening in the UK and around the world
• www.affiliates4u.com – I’ve spent squillions of hours on this online marketing portal in the last decade
• www.notmoresocks.com – gives me ideas on what to buy as gifts, otherwise I end up getting everyone chocolates
• www.freecashback.co.uk – cashback and voucher code portal from Azam enables people to save money at 2000 UK retailers

Which entrepreneurs do you admire most?

I’ll mention one who is well known and another who is not.

• Bill Gates is a personal hero of mine, because he proves the geek can inherit the earth! He had the conviction to take a leave of absence from Harvard to create Microsoft, had the vision to see the money would be on the software rather than the hardware side, and developed a formidable global company. There are a lot of people who have achieved nothing in life who mock Bill Gates, but I have the highest of respect for somebody who works his way to the very top and then gives away billions of dollars to the needy.
• On a personal level, I have had the honour of working with Senthil Kumar, the MD of V A C Media, for the last four years. In a very short space of time he has built an internet company with 70 staff which is the leading provider of loyalty shopping portals in the world. His work ethic is inspirational and I can only think of four or five days in all the years I have know him when he has perhaps not worked at least 12 hours. But what means the most to me is that, despite all his success, he remains a thoroughly nice bloke.

Related posts:

1. Featured Entrepreneur: Lizzie Fane
2. Featured Entrepreneur: Brett Afshar
3. Featured Entrepreneur: Dr. Brad Backus

S4S NEW Website

Blogs, News, Nationwide Events, Live & On-Demand Video Content, Featured Entrepreneurs & Entrepreneur’s Networking Forum!

We are excited to welcome you to our smashing new website! If you hadn’t noticed we have been busy making important changes to our website, ensuring that we are constantly providing you with the most up-to-date information, articles, news and online resource that we can. All of us at S4S hope you enjoy the new features on the website – do stay tuned as there is much more to come in the not too distant future!

So, What’s NEW?

The S4S website is packed with brand new content and features, including:

• NEW: Online Entrepreneur Community
• NEW: Live & On-Demand Video Material – S4Stv
• Annual Events Calendar
• Doug Richard Blogs
• NEW: Featured Entrepreneurs
• BOOK Doug - Inspirational Speaker

But most importantly, we hope it gives you many ways to tell us just what else we can do to make S4S better. Our Forum, the Comment links on our blog pages, links to our email and mailing addresses . . .

We look forward to hearing from you often in the months and years to come.

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“Why it’s wrong to charge startups to pitch =========== I’ve been in the startup scene since 1994 and in those 15 years I’ve met, interviewed — and in some cases, pitched — the most powerful investors in technology. None of them have ever charged me a dime for doing so. Why? BECAUSE THEY ARE RICH!”  (http://calacanis.com/2009/10/09/why-startups-shouldnt-have-to-pay-to-pitch-angel-investors/).

Just to be clear, I completely agree with Jason, start-ups should not be charged to pitch their businesses to angel investors. What struck me about Jason’s very strident blog is how astonished he seemed to be that such un-ethical activity existed and, secondarily, I am quite sure that he is wrong about why they should not charge. It is not because they are rich, but rather because they have all the bargaining power and further, if they are indeed actually angel investors then it is not in their self-interest.

Money is in scarce supply and it creates a very imbalanced marketplace. Charging entrepreneurs to pitch merely because they can is not an adequate reason to do so. Moreover most angel groups that actually want to create successful investments know that it is not in their self interest. When I started the Cambridge Angels (http://cambridgeangels.angelgroups.net/) with Robert Sansom in 2001 we took the decision to only charge the other Angels and never to charge the entrepreneurs at all. This extended well beyond a pitching fee. Our reasoning then was that many start-ups had good ideas but no money and we would be arbitrarily denying ourselves valid opportunities because they lacked the very thing we were in a position to commit: money. Second, that if we indeed took money it would be difficult to turn away the opposite entrepreneurs: those with bad ideas and enough cash to pay a fee.

As it turns out, the commentary surrounding Calacanis’ blog supports our decision back then with one ex-employee of Keiretsu Forum describing the business as follows,

“Keiretsu recruited me directly out of college, yet I only worked for the company for about [REMOVED] months: the amount of time, I suppose, that it takes a reasonable and ethical person to come to terms with the reality of this scam…. These networks charge because they have to. They know that they have their business model upside down; I know that they know this because that was the first input that I offered to the head of one of the largest branches….Why didn’t Keiretsu charge the investor? Because no investor was willing to pay to be a member. While they say that they have membership dues (and other branches may very well collect them), I watched as a full year’s worth of membership dues went uncollected for the branch where I worked. When I asked multiple Keiretsu investors (off the record) what was up, they explained that, if they were charged even a cent, they would simply terminate their membership. And why was this the case? 3) Because Keiretsu attracted sub-par entrepreneurs, of course. For the exact reasons that you described. The goal, in any given month, was to have five entrepreneurs pitch, yet it was a rare month where we could dig up that many who were willing to pay Keiretsu’s fees ($7,500 to pitch at all four regional locations). So, in reality, we were essentially accepting anyone who was willing to pay.” (http://calacanis.com/2009/10/13/and-now-some-smoking-guns-or-part-two-of-angels-that-charge/)

I note with interest that Keiretsu Forums who have received much of the negative publicity in the US also apparently have a London chapter (http://keiretsuforum.com/frontend/ManageChapterSection.aspx?Page=Welcome&ChapterID=9) which is fascinating as I had never even heard of them prior to this controversy. I have sent them an email asking if they charge in London as well. I shall await their response.

One other UK group that was highlighted on the Calacanis site is Angels Den (http://www.angelsden.co.uk/) who apparently charge £800 to present. (http://calacanis.com/2009/10/09/why-startups-shouldnt-have-to-pay-to-pitch-angel-investors/)  Bill Morrow, the founder of Angels Den has vigorously defended his right to charge. He was quoted in the Guardian as saying,

“The base assertion that if you’re an angel, you should not be charging people to see you, is quite correct,” he said. “But there really has to be a distinction between those companies who actually have the capital and companies, like ours, who introduce you to people with the capital.”

“For £800 we help you write your business review, we spend half an hour on the phone with you, meet you, give you pitch training,” he added. “I’m happy to stand up and say that we genuinely believe that it’s a service for both sides – before we started the training or help you with a business plan, nobody’s getting funded.”  Asked whether it was fair to take a potential portion of funding away from young companies, Morrow said it was normal practice for European investment networks to do this – in fact, he said, many of his competitors demand much more for their services.  ”We’re slightly bemused that he [Calacanis] has chosen us, as we are by far and away the cheapest,” he said. “We’re the largest player, we’ve got the largest number of angels and we’ve got the most activity in the marketplace – but we’re also the cheapest. The number two charges £15,000 to pitch, a 5% success fee and then a 3% equity stake. The next biggest player charges £7,000 and charges a 5% fee.” (http://www.guardian.co.uk/technology/2009/oct/13/angelsden-funding)

Bill makes an interesting point but one that needs clarifying. But first I do not agree with him that prior to Angels Den nobody was getting funded. That is plain silly. Further I do not think that a 30 minute phone call and help with writing a business review is what separates the fundable from the unfundable. The final point I disagree with is that it is normal practice for angel networks to charge. Cambridge Angels don’t and have raised millions of pounds from its members and friends over its 8 years of existence.

In deference to Bill though, he does make a serious point. He is essentially differentiating between three activities: corporate finance, angel group investing and rip-off artists. In the first group are organizations that have rolodexes of people with money and who charge entrepreneurs to raise money from those networks. Corporate financiers usually charge a fee and a percentage of the money raised, just as Bill at Angels Den does. So to the extent Angels Den is essentially a boutique corporate finance house with a network of high net worth individuals then his business practices are no more or less legitimate than any of the other corporate finance houses.

But there are differences. Corporate financiers do not make their money on their fees, they make their money on the percentage they get of the money raised. And the “book” that they prepare is a time consuming, very professional document that is created to show the company in its best light and to also preserve the reputation of the corporate financier who is as worried about maintaining his money relationships as he is about any given entrepreneur. The evidence of their success is seen in the wall of tombstones that every corporate financier has on their site (See http://www.gpbullhound.com/trans.php or  http://www.cobaltcf.com/index1.php?page=track for examples). Their ability to raise money (or sell or buy businesses) is transparent.

Angels Den does not have that transparency. There are some case studies on the site but every money raising is not listed on the site. Given how radical a departure that is from customary practice it leaves one wondering how much money has been raised? How successful have they been? It is easy enough to remedy. If Angels Den is to be regarded as a proper corporate finance house then it should probably present itself as one and be very transparent about their successes to date.

I do not know who he is referring to who charges £15,000 or $7,000 for the right to pitch but I would assert on those numbers alone that they fall squarely into the third group: rip off artists.

I started this post noting that what astonished me about Jason’s post was how astonished he was. I am not. When I wrote the report for the Conservative Party on small business support and its effectiveness or ineffectiveness (http://www.bl.uk/bipc/pdfs/richardreport2008.pdf) I was struck by the number of bottom feeders in the marketplace who make their money by preying on insecure and inexperienced entrepreneurs.  If you know of, or encounter, businesses that engage in this practice, I hope you will let me know at info@schoolforstartups.co.uk.

Related posts:

1. What Angel Investing & 1 Night Stands Have In Common
2. The Price of Money (At Least You Can Eat Catfish)
3. UK Startups are Prey for Rip Off Artists Disguised as Angel Groups & Financiers, says Doug Richard

In his speech last week at Thomson Reuters, George Osborne asserted that there are two issues holding back UK business: credit and confidence. I could not agree more. Whilst he did not touch on what he might do about confidence, I think that in the context of existing small businesses and potential startups, the best way to increase confidence is to reduce real risk. And we can decrease risk by improving the skills of our entrepreneurs so that they make fewer mistakes. Its about education.

As for credit, well, that’s another kettle of fish entirely. Anecdotally there is no doubt that it is more difficult for small and young businesses to get commercial credit, ie loans. Mind you it has alway been difficult and probably rightly so. Commercial and retail banks (the kind that take deposits and lend it back out using the spread to make a profit) have historically been conservative lenders because the margin of profit has been slim. Working on a spread of less than 10% they cannot afford for loans to go bad, or if they do, for there to be no way to recover their money.

Thus, they have historically been asset-backed lenders; that is they have always looked for assets worth the value of the loan to secure the loan in case it went bad. That could be machinery in the business, or your family home and a personal guarantee. I have never had a problem with this given how little they make on the money they lend. But it does make commercial lending inappropriate for young businesses, most high tech businesses and many small businesses without hard assets.

The logic of the Small Firm Loan Guarantee Scheme (SFLGS) which was recently renamed the Enterprise Finance Guarantee (EFG) has always been sound: if a firm could show that it could service a debt the government would step in and provide up to 75% of the asset backing, thus broadening commercial lending to those firms that were cash flow positive or could become cash flow positive, but did not have adequate assets to support the loan.

It is a shame then that the banks have used the EFG primarily to reduce their risk to lend to firms that they would otherwise have already lent to rather than broaden the scope as the scheme was intended. How do I know? Because I have repeatedly sent companies I have invested in, or mentored, in pursuit of loans and in each case the banks involved have always looked for the firm to have assets or guarantees that covered not only the 25% of the loan that was at risk, but the 75% that was not at risk. They justify this on the grounds that they “do not want to have to go to the government after the other 75%.” Meaning, in simple English, that they want the firm to have precisely the same lendability criteria it would have if the scheme didn’t exist!

Thus, when George Osborne calls for a national guarantee scheme, I begin to think that we are merely reducing the risk of the current portfolios of the banks. Perhaps we should look for remedies that don’t involve the banks at all. Perhaps we should be looking for means of encouraging people to directly invest or lend to small or young businesses. What we shoulld do and how we should do it is for another post but I will say one thing. From the front lines, it is perfectly clear that these schemes, under their old name or under their new name should be called RBR Scheme, because Reducing the Banks Risk, is all they really do.

I am holding a full day workshop on November 18th in London at the Royal Institution. It’s called Find, Pitch & Close: The Art of Securing Investment. In addition to looking at the various government schemes that work (or don’t), we will be working through the ways you can really raise money, and what you will have to do to get it. If you are interested, just go here to sign up:  http://findpitchclose-blog1026.eventbrite.com.

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It also has an unusual process of deciding its own lineup, the famous “panel picker” process where everyone submits their suggestions for a panel and the judges then use the vote to influence though not determine the outcome. I chose to submit a panel this year because I think that there are very few international forums for discussing or exploring how the entrperenurial culture that makes SXSW and the Valley successful exist. Even at SXSW there is a natural “US-centricity” which is not bad just inevitable.

Unfortuantely European events are equally parochial. What is unfortunate is that there are thriving entreprenurial cultures expanding globally from Mumbai to Buenos Aires and for all the fact that we live in a connected world, they seem as distant as ever from one another.

More importantly, we face awkward economic times and the truth is that sustainable new jobs and increased productivity most often arise in the creation of innovation centric small businesses. Thus encouraging entrepreneurs and an entreprenurial culture beyond the normal hot spots should be a matter of global interest. Yet the world still clings to romantically outdated notions of the entrepreneur as a cowboy and an intuitive visionary. As though somehow you must be born with the right stuff and it cannot be taught or learned. While there is no doubt that a great violinist has something special that sets them apart, we often forget that decades of training and hard effort are what permit that bit of uniqueness to reveal itself.

The same can be said of entrepreneurship which means that by definition we can teach a great deal of value and it follow that if something can be taught it can be shared.

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