I was delighted this week to read that (at last!) many in the serious start-up world are shunning the term “unicorn”.
For many of you out there starting and building businesses, if you were planning to raise equity-style investment this should be a major relief to you.
$1bn valuations are becoming less frequent and less fashionable
It’s time to get real: unicorns are outliers in the real world. $1 billion valuations are becoming less frequent and, indeed, less fashionable. In my view, they distort reality and almost have an elitist tone that leaves many out.
If anyone in Scotland manages to start, grow or scale a business and goes on to sell it for, say, £10 million and the founder gets a nice £2m cheque in her back pocket, then this is a success… right? Wrong!
In the world of those peddling mega valuations and venture capital-led deals that inflate valuations (just because the venture capitalist wants to) this founder is deemed a “failure”. How can this be right? How can we perpetuate the myth that exiting your business after ten years of hard graft is a failure? It’s time to wake up and get real.
One the most successful entrepreneurs – and a very decent bloke that I rate highly as a businessman and human being – is Mike Welch OBE of Blackcircles fame.
Mike built Blackcircles from scratch and sold it to Michelin for £50m, pocketing a nice fat cheque for himself in the process. Mike very kindly came to speak at Entrepreneurial Spark a few years back. He talked about perseverance and hard work.
There’s no doubt that his story is a great one. It’s inspiring, it’s human, it’s clever. Mike has been applauded by his peers and recognised at many award dinners. In my book, his story is a brilliant one that should and does inspire many.
And guess what, he is not a unicorn. Who knows where Mike will go, but I’m sure that he will undoubtedly have even more success. But, the point here is that he and others like him are the real face of what entrepreneurial success looks like.
I recall John Huston of the Ohio Tech Angel syndicate visiting Scotland about five years ago. LINC Scotland had brought him over and I was lucky enough to be at the talk. John was great to listen to. Essentially, he would take about six to ten start-ups into his short programme.
He would sit the entrepreneur down in front of him and make it clear what the deal was. It went something like this: ‘Would you like a cheque for $5m in your back pocket in three to five year’s time?’ Yes, I would. ‘Good to hear. If you want that you will work your socks off for the next three years and work with us to help you to get there. Are you in?’ And guess what… 100 per cent said yes.
To my mind and many others who enable early stage ventures, this is a great deal and I wish we had more and more of this rather than the current distortion of crazy VC, unicorn, “enter my name in the annals of fame” brigade. There are two points to note about what the Ohio Tech Angels, led by John, did.
The first is that he set a realistic vision for what may be achieved in five years: a cheque for $5m. And how many of us would not love to deposit that in our bank accounts?
This is touchable, tangible, achievable money. And it allows the entrepreneur to go and start and fund their next adventure should they wish to do so. The second learning point here is even smarter. John set the expectation – that he was not simply going to seed fund the entrepreneur. He and his team were in it with them for the long term.
This is where the real magic is found in this proposition. Far too many start-ups get invested and then left to their own devices. They go to events and listen to “gurus” wax lyrical about scale and how wonderful it all is.
But this skews reality and can distort perceptions of what success is. Having a gutsy enabler working with you for the long term – that exit – is gold dust. And that is where I am headed in my thinking. So too, many others.
It’s time to get real… get rich.
• Agitator and disruptor Jim Duffy is head of #GoDo at Entrepreneurial Spark