Another year and it is time for my favourite networking group www.3Cscommunity.com meeting this time at UCL Advances, the entrepreneur arm of the huge University College London http://www.ucl.ac.uk/advances/ The Dragons’ Den format allows 3 or 4 presentations in 2 and half hours with time for questions. After this, networking carries on at a pub nearby where some of the most useful contacts are often made.

First presentation is by Hugh Stewart Managing Partner of Shackleton Ventures www.shackletonventures.com who has been in the venture capital (VC) business for 26 years and has lost count of how many £millions he has raised. Best ever investment returned 37x his investment while the worst lost everything after 4 rounds of funding. The USA seems much more switched onto VC than Europe. Google and Amazon had a 5 year time span from launch to floating the shares – something that would have taken at least twice as long in Europe. Business failure in the USA is not viewed as a personal failure with a lingering stigma. In Europe, people are shy about mentioning business failures although this is slowly changing. Failure is often an essential part of success – not my words, rather those of author J K Rowling  http://www.youtube.com/watch?v=pucdJHjZaqs

Cultural differences show up in business plans, where a Russian one had two pages of introduction and 78 pages of equations – German & Swiss plans also do this sometimes.

Curiously, uniqueness in a product or service is rare, and may not not make things easier as there is nothing to compare against. Classic exception here is Edwin Land and his Polaroid camera, where his 3 year year old daughter wanted to see the pictures immediately after he had taken them   http://edhelper.com/ReadingComprehension_54_1182.html Legend has it he worked out the solution in an hour after this incident, but getting it to the commercial stage took a bit longer.

Investors don’t like surprises – openness works better. Again, something that is very much part of American culture – we like to keep things to ourselves in Europe.  Main time when Americans seem to keep things quiet, is when playing poker, but I digress. Small business adapt, move and do things more quickly than a big business and can often grow more quickly. Something this Government doesn’t realise, where the quickest way to create growth and have real green shoots of recovery would be to stimulate or deregulate the small business sector, but I am not holding my breath.

Best time to start a new business is in a recession like now, as if you can survive and grow in current conditions, then you ought to be able to survive in better times. Most important thing in any business is management. Next most important thing is still management. Third most important thing in a business is – don’t be surprised – management. Investing in a Class A management team in a Class B business will generally make money, while the opposite will generally lose it.

Commitment or “skin in the game” matters and reminds me of a VC story from a few years ago. A £2 million VC deal was ready to be completed with a bankers draft ready on the table. VC guy asked the entrepreneur if he would put a token amount into the venture? His polite but negative reply killed the deal.

Being able to establish rapport in the first minute is essential as most people make up there minds in that time, even if on a subconscious level. Bit like the estate agents’ saying that people decide whether they are going to buy your property or not, within 15/20 seconds of walking in your front door. Hence all the advice about having the smell of freshly-baked bread or coffee in your home when people come to view.

Investors work on IRR or Internal Rates of Return rather than Annual Rates of Return like Financial Advisers, for example. To get the mindset here, think of the old Indian legend about the invention of chess where the inventor asked to be paid in grains of wheat  http://en.wikipedia.org/wiki/Wheat_and_chessboard_problem with on the first square, two grains on the second square and so on. The number of grains that would be on the 64th square would be 1.84 to the power 19, or a very, very big number – ask your kids if you have forgotten your maths.

Shackleton do not invest in everything (no one does) but they still get approaches from people who have not looked at their website. This clearly states what they are and are not interested in. Same situation with www.angelsden.co.uk featured in  http://www.georgeemsden.co.uk/2009/07/im-an-investor-get-me-out-of-here/ where people who don’t pay the £500 registration fee, don’t get any help no matter how brilliant their idea supposedly is.

Some businesses can actually manage without VC funding and get going on lumps of cash from family and friends. This can be a bit of a pain when a business is finally sold, as in one case, 38 signatures from family and friends had to be got within two days. The entrepreneur here took a year off and is now looking at his next idea, but using his own money this time. Do Without is a simple and cheap option, although not appropriate for every business. Guests on the BBC Dragon’s Den are regularly asked why they need the money? Some don’t really need it, and probably have their eye on the publicity from appearing on the show at peak viewing time. Entrepreneurs nearly always underestimate the amount of time taken to get funding. If the owner has started a business and is spending half his time making fundraising phone calls, the business will suffer. Better to employ someone to do this.

Most surprising danger is having too much cash. Loadsamoney can lead to precious funds and time being wasted on fancy furniture and planning, meaning the time when you actually get on the phone to try and get business is delayed, and delayed. All successful small businesses have to be sales driven – they don’t last otherwise.

For a weekly view on entrepreneurship see Mike Southon’s FT column http://www.ft.com/comment/columnists/mikesouthon and next 3Cs meeting is 23rd March.