These top tips from Niki McKenzie, investment director at business investment syndicate Archangels, make essential reading for ambitious entrepreneurs.
I’m often asked for advice by start-up entrepreneurs as they set out to turn their business ideas into reality. As Investment Director at Archangels, which invests in early stage technology and life sciences businesses across Scotland, it comes with the territory.
Back in 1992, Archangels was itself a start-up company. We’ve learned many lessons on our own journey since then and those teachings are as useful for the businesses seeking investment from us now as they were for us all those years ago.
As an entrepreneur it’s important to consider not only whether you have the desire, but also whether you have the credentials and the experience to build the business you want to build. That doesn’t mean that you need to have all of the answers. However, it is important to recognise what you don’t know and get people on board who can make a positive contribution to your business.
Being clear about what you want to achieve is important, too. When Barry Sealey and Mike Rutterford got together in 1992 to form Archangels, they recognised very early on that if their new venture was to be sustainable, there would have to be a strong sense of purpose. So, Barry and Mike came up with the four pillars upon which they would build Archangels:
- They both wanted to help the next generation of entrepreneurs to build great businesses based in Scotland
- They wanted give something back, not just in the provision of capital but also by sharing their experiences and their networks
- This was not going to be a philanthropic venture – they wanted to make some money
- Finally, they wanted to have fun
These four foundations still underpin how Archangels operates today, 26 years down the line. That’s an important lesson for everybody starting out on their journey. All businesses should have their own “pillars”. You may be driven by making a social impact, by climate change or by getting a product you have been developing for years to market – but think about what your sense of purpose is as a business, because that will keep you focused when things aren’t going to plan.
Building a business from scratch, developing a product and taking it to successful commercial adoption is tough and it is high risk. The odds are stacked against you, so you need to think about what you can do to reduce the odds of things not working out.
Failure is not all bad though. On the contrary, failure can be a positive thing if you learn from it and it makes you think about what you can do next time around to increase your chances of success.
There are things you can do to reduce the risk:
- As I mentioned before, surround yourself with great people. Recognise what you don’t know, search far and wide to find those who do and get them on board.
- Engage with your market. Understand what the market wants and what your customers’ requirements are. Build your profile in any way you can. Customers won’t come to you just because you think you’ve developed a product they can’t do without. You have got to get out there and tell them why they can’t do without it. Remember – they don’t realise they need it yet!
- Manage your cash carefully and spend wisely. These are disciplines which all business leaders should have but it is particularly important when you are at the start of the journey.
- Do careful due diligence on your potential funder as it is likely to be one of the most important relationships you will ever make and can be key to success or failure.
The journey to success is likely to be tough. Having the right funding partner on board can immeasurably improve your chances of getting there. It is important to consider:
- What businesses have they supported in the past? What do these firms think of the funder?
- How deep are their pockets? Are they patient investors?
- Are they aligned with management or do their structures penalise management?
- What is their track record in getting companies to commercial success and achieving exits?
- What approach do they take when things don’t go to plan?
- How much input will they want to have in managing the business?
My final thought would be this: take the risk and go for it. You’ll never know the outcome of your efforts unless you actually do it. In the words of Amazon founder Jeff Bezos: “I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.”