Visiting
Venturefest Yorkshire and using the WiFi network kindly sponsored by Divine Internet.
The idea is to provide a venue for 'connecting knowledge and technology based entrepreneurs with everything they need to make them successful. I was just going to visit and have a look at what's happening and blog it. But Andrew Macdonald has roped me in to chair a session.
Keynote - Doug Richard. Founder of Library House (and Dragon's Den)
How do you look at starting a business?
Do what an investor does - only 4 things relevant - Benefit, Team, Market, Return.
Benefit
The proposition must deliver benefit. Cost save, make money,
Don't fall for the ugly baby syndrome. Strangers will tell you more than your friends or family about the quality of your new business idea. Test the proposition for its relevance to your target customer base. Benefit is the core thing.
Can you prove it?
Is the cost benefit definable in terms of the cost of the product for example?
What's the impact of the business (is it lifestyle or scale?) A scale business is more difficult - they have to grow or they die. Scale businesses attract investors. Lifestyle businesses are more difficult.
Team
The only one that matters ultimately. A lot of effort is invested in looking at the team. The business only comes to life because of the resilience of the team.
Listen to your customers - ignore everyone else. But as an investor I have to believe in you. And that means that the investor will spend a lot of time looking at the team.
When you're new you need to sell to everyone. Vendors/suppliers especially as they can give you 'free money' in the form of credit. Much cheaper money than anywhere else. "Don't go for the largest customer - go for the fastest growing".
Commitment is another key issue. And you need to be careful about who else you commit along with you (family etc).
But you also owe commitments to others - employees, customers and investors. As soon as they hand over the money they essentially lose control.
Being involved with businesss is not a personal mission - so don't confuse your priorities.
Market
There is a myth of markets. You need to know only one - the one that will grow fast. This gives you new customers all the time.
Return
Very simple. If I put in £1 today how much do you return to me? Needs to be a fundamental. Think about the exit also. "Take cash". The basics of exit are "You exit" - a share transaction is not an exit.
Questions
Why did the BBC not do due diligence on Rachel?
There is no reasonable thing you can say.
Q - Successes from Dragon's Den?
Too early to tell. One quick failure - 12-14 investments made - 1 may succeed.
Q - How do you look at calculating returns?
Formula to apply for working out ROI - needs to look at sector.
In general, though, VCs have expectations of 30% compound over a 10 year fund. Really high risk has to have 1,000 percent in 5 years - to pay for the 9/10 that will not make the target returns.
Q - How important are business plans? Versus intuition.
Not a choice between the two business plan vs intuition. The depth of thought is more important. Need to understand how much thought has gone in - and it's ability to get the business to where it needs to be. Needs to be able to respond to the situation as it develops. Business plan needs to reflect quality of thinking.
Q - Why did you do the Dragon's Den?
I thought it would be a hoot and no one would watch it. Have done it the second time. Won't do it the 3rd time. It was fun. Thought it would be interesting