Archives for March 2009

Chris Grayling ‘Army of Entrepreneurs’ Proposal

March 24, 2009 by admin

Every business start-up has a cost, and if you’re on the dole you can’t easily afford to buy basic equipment. At the moment the only start-up cash available from the “new deal” for unemployed people trying to start a business is £400. We don’t think that’s nearly enough, so we’ll give the business start-up specialists the ability to fund costs of up to £2,500, and then reclaim the money from the benefits saved once the business is up and running.

Chris Grayling – How to Lift the EconomyWith an Army of Entrepreneurs

On the face of it this looks like a great idea. The logic is both simple and compelling. Startups cost money. People don’t have it. Let’s give them it, funded out of future benefits savings.

Several reasons why I think this might not work in practice:

It will attract a lot of people to the £2500 who are not sufficiently committed to enterprise and self employment – enterprise professionals will spend hours of their time wading through the sharks to find the genuine latent entrepreneurs.
It will encourage some people into enterprise for whom it is almost certainly not the best option – business failure rates are likely to increase with this type of soft start-up provision – damaging the enterprise culture in the medium term. Only if we use robust investment criteria will this be avoided. This means turning a proportion of applicants down – leading to bad word of mouth.
If business ideas are viable they will find investment – the problem is still not lack of cash – it is lack of investment ready business plans. Let’s spend our money here on providing inspirational coaching and good technical advice (NB there is already plenty of technical advice out there – labeit patchy in quality)
Sources of funding and sources of advice need to be kept separate. It is too easy to tell the funder what they need to to hear if they are to release the money. You MUST be able to speak the unvarnished truth with your advisers.

There maybe ways to overcome most of this stuff.

However IF the only reason a business gets started is because of a £2500 gift from the government – offset against future benfits savings – then I for one would worry. Unless there is real commitment, passion, talent and skill to invest in I can see lot of cash going down the tubes.

Your thoughts?

Dragons’ Den is a Bare Faced Lie About How Business is Done

March 24, 2009 by admin

You can usually trust a good comedian to get down the truth of the matter, and David Mitchell has done just this with the Dragons’ Den format.

“Dragons’ Den is a bare-faced lie about how business is done,” he says. “The people who do that job are not rude because there’s no percentage for anyone in them being so.

“They don’t sanctimoniously tick people off nor do they spend 10 minutes thinking up a weak pun which combines their wish not to invest with the field of the invention in question – ‘A new type of cheese, I’d have to be crackers to invest’ as if they’re auditioning for the Beano.

“Dragons den not only misrepresents rudeness for straightforwardness, but also implies that this is how successful business people behave.”

Rudeness aside Dragons’ Den is responsible for other misconceptions that damage the perception of enterprise and entrepreneurship:

Getting investment is a competition. The best entry wins whether it is good bad or indifferent. (Specifically this is what the enterprise professionals ‘teach’ when they try to piggy back on Dragon’s Den to get their engagement numbers up. The dragons themselves would invest in any and every opportunity that meets their investment criteria.)
Any business that does not meet the criterion for investment from a venture capitalist is not a good business. “It might make a decent business for you and your family – but there is not enough in it to interest me – I’m out“. This echoes and reinforces the disdain that much of the public sector has for ‘lifestyle’ businesses. They seem to forget that most entrepreneurs learn the ropes in life style businesses before some of them get bigger aspirations. As I believe Peter Drucker said – ‘You can’t have the mountain top without the mountain.’
You have to conform to venture capitalist norms and conventions if you are to succeed – everything from the way you dress, your hairstyle through to your knowledge of the numbers (you had better pretend WITH CONVICTION that your crystal ball is good for revenue forecasts at leas three years ahead.
Investment readiness should be evaluated on a single pitch – there is a simple binary response – yes or no. In fact most investments come as a result of a relationship between an investor and client.

So come on. Let’s drop the Dragon’s Den emulations. No more ‘Strictly Enterprise.’

Instead let’s get down to the hard work of having some informed conversations about enterprise and what it can do for our communities.

Economist’s Special Report on Global Entrepreneurship

March 23, 2009 by admin

The Economist’s special report on entrepreneurship is well worth a read. Some highlights:

entrepreneurialism needs to be rethought: in almost all instances it involves not creative destruction but creative creation
the report uses (entrepreneur) to mean somebody who offers an innovative solution to a (frequently unrecognised) problem
its not all youthful techies – Harland Sanders started franchising Kentucky Fried Chicken when he was 65. Gary Burrell was 52 when he left Allied Signal to start Garmin
average entrepreneur was 39 when he or she started (their business) The number of founders over 50 was twice as large as that under 25.
why have so many once-celebrated entrepreneurs turned out to be crooks?
the entrepreneurial idea has gone mainstream, supported by political leaders on the left as well as on the right
the history of … start-ups reads like a roll-call of business partnerships: Steve Jobs and Steve Wozniak (Apple), Bill Gates and Paul Allen (Microsoft), Sergey Brin and Larry Page (Google), Mark Zuckerberg, Dustin Moskovitz and Chris Hughes (Facebook). Ben and Jerry’s was formed when two childhood friends, Ben Cohen and Jerry Greenfield, got together to start an ice-cream business (they wanted to go into the bagel business but could not raise the cash). Richard Branson (Virgin) relied heavily on his cousin, Simon Draper, as well as other partners. [WHY DON’T WE TEACH THE IMPORTANCE OF BUILDING DIVERSE TEAMS?]

Read the full report here.

Are You Biased Towards the Present?

March 23, 2009 by admin

A paper published by the UK Government’s Parliamentary Office for Science and Technology provides a useful reminder that people do not always/often make rational decisions, and that one of the reasons for the irrationality is a bias for the present.

In short this means that we put off or never do things that are in our own best interest simply because we see the pay-off being to far away in the future. Hence we stay fat and smoke – because any benefits of giving up won’t be experienced for ages.

It transpires that the poorer you are the more likely you are to show this bias for the present over the future.

This bias would seem to be important for enterprise professionals to :

recognise,
understand and
overcome

Any tips you want to share for helping cleints overcome their bias towards the present?

You can read the full OST paper on Delaying Gratification here.