“The grass is always greener…”, there are many catchphrases that describe life and business, but they always seem to be in the future tense and suggest some sort of heroic journey. In our experience, uncovering the next big thing from an investment perspective is more about hard work and creating opportunities rather than hoping they will come. Identifying opportunities with outstanding potential is not your biggest obstacle—they often simply stand out. The challenge comes in executing the opportunities to deliver investor value.
Too often companies celebrate raising money like this is a milestone—look at all the crowd funding companies and the sense that raising funds for a business is a reason to celebrate! Can you remember the last time you saw real success publicised when a private company sold out and shareholders made loads of money? Society is not recognising entrepreneurship in the right way—we need to be celebrating those that have actually delivered investor returns rather than those who have raised money.
Engineering Business Success
This really leads us to a new wave of thinking in the world of early stage investment and corporate finance. Business success in our view can be engineered. Increasingly companies are being created and engineered carefully at each stage rather than relying on the vision and execution capabilities of an entrepreneur. The development of a business is a team effort and like most teams the players have different skillsets which are called upon at different times. A team is not built around a captain, in fact the captain often ascends from watching how the team performs.
We call this approach creationism—where we work with companies to ensure they have the right people for the right jobs at the right time—to maximise their potential and improve execution. If you are building a digital business your first team member needs to be someone who can actually build the technology. Once built it will require new team members to take it to market before the captain brings the skills and experience to really get the dial moving. In fact, early stages investors should act more like a recruitment agency than simply passive investors and advisors.
The Hands-On Approach
The key is to work with entrepreneurs in a more active manner to map out the execution timeline and resources needed to succeed. Early stage business funding does not need to be fraught with risk and riddled with failure if the investors and the investment channels or platforms introduce more rigour into the management of the businesses. Ensure prior to investment that a road map has been set out to achieve success with all the relevant resources and people mapped out.