The recent Innes 48-hour business startup competition reeled in a host of star speakers. Among them was seasoned entrepreneur, advisor and investor Neil Richardson, who has been part of ventures including Gallagher Group, AgResearch, Endace and many more. But like any entrepreneur, he's been through failures and experienced burnout. Here are his 10 lessons for would-be entrepreneurs:
· Understand the size of the prize. New Zealand is unique.
· A superior product is only the starting point. New Zealand entrepreneurs are very good at innovation. But products are a sunk cost until they are effectively leveraged. We tend to think good products will sell themselves, but that is naïve.
· The innovation space is moving from products to business models - an area we, as New Zealanders, have a competitive disadvantage in (creating and resourcing effective business models). We are not good at developing product roadmaps. We need to think about what our products are going to look like in three years’ time. Other things are: innovative and flexible business models, realistic funding programs, quality teams, developing a global perspective, building a global business.
· Driving shareholder value is an art not a science. But there are some basics that the market rewards. Here is an IPO road map:
o High margins (65% plus)
o Fast Growth (50% CAGR)
o Recurring revenue streams
o Rapidly growing market
o Good management team
o Tier one customers
· You need a balanced founding team with strong leadership attributes. Skills and experience are one thing but personality matters as well. You need the resilience, ability to handle exhaustion, ambiguity, complexity, difficult situations and psychological pressure. If you want to be good at startups you need to develop your personality, value structure and core beliefs.
· Practice situational schizophrenia or contextual role playing. In New Zealand we need to get used to being able to wear different hats. In startups all want to be employees, all want to be directors and all want to be shareholders. This is schizophrenic. Successful executives, shareholders and directors use creativity, reflection and model building to occupy new personal spaces. What did we do wrong? You do not learn from experience, you learn from understanding what could have been done better.
· Get the business structure and foundation documents correct! You tend to start businesses with people you know. During the process you begin to fight over who does what and who is entitled to what. If you are smart you do not need to spend much time developing them. You need to find the motivation to wear the shareholders' hat, identify what is it that you need as a shareholder and reflect this in the documents.
· Shareholders must change loyalties as the company grows. “Should we hire a CEO? They all want to get paid!” It is a development path for everyone.
· Insufficient capital is ALWAYS a problem. The right capital is what fits the particular context and stage of development. There is no perfect source of funding but you will always outperform bank rates when you have a good business. Use government funding to achieve your vision, not to fund your survival. Government funding is a wonderful discipline but unlike a bank you will need to demonstrate impact. And a strategic investor is a mentor: someone who has the same value system; someone who has respect for you and who you have respect for; someone who can easily get into your head and understands your business from ground zero
· Finally, you need to make sure you do not make decisions on short term criteria that have a long term impact.