Few Entrepreneurs Know How To Grow A Business

For some time now corporations have been questioning the worth of the MBA. There have been numerous articles stating that the MBA does not really provide the experience necessary to create a productive corporate executive. My own experience provides an interesting parallel, although some several decades earlier. Even though I had university degrees in economics, accounting and a Ph.D from London Business School and I was a CPA, I found myself out of my depth when we started out first business.

What I discovered is that the conventional business degree takes a large corporate view of the world. Give me a few million dollars and I could build you a budget, develop a project plan or roll-out a marketing program. But no one told me that I would have to go door knocking for customers, manage delays in product development or have to threaten customers to collect cash owed to me. I can’t recall ever learning how to recruit, motivate and terminate staff or understand how to get free public relations. When you are building a business on a shoestring, most of the formal business training doesn’t seem to work.

Business risk is all around you

Without question, I was destined to become insolvent before the business really got going. However, I was saved by an Angel investor who brought incredible discipline and a lot of wisdom to the business.

My business partner had done some consulting work for a local corporation and we had become friends with most of the Directors. When we approached them for a corporate investment in our start-up they all laughed and stated that they had a better chance of getting their money back betting on the horses. Given what we knew about growing a business and the quality of our business plan, I suspect they were correct. However, they all put in a few hundred pounds sterling and that helped us get started. One of the Directors volunteered to be our Chairman and that really saved our bacon.

You need good systems and governance

The first thing he did was to insist on a full management reporting pack. He also requested us to update our priorities every month. Probably the greatest benefits were in being held accountable for our performance and having access to a person with great business experience.

I think we forget that just being an entrepreneur or an inventor does not guarantee you know anything about starting, developing and harvesting a business. What I found was that traditional business education has large gaps in it when it comes to start-ups. That being the case, finding a quality mentor and having access to a group of experienced entrepreneurs can be a lifesaver.

I meet a lot of early-stage venture entrepreneurs, many with great innovations, who are wasting their potential simply because they don’t know any better. Not their fault, they have the energy, passion and creativity to produce something which the markets wants but they don’t have the experience to make the most of it. Regrettably, there are many like them and you know that it will only take a little bit of bad luck for their ventures to fail.

Even though we think of an Angel as a source of equity finance, perhaps their greatest contribution is to assist entrepreneurs realize their potential by bringing their experience and business wisdom to the venture. When you access an Angel Group, you can multiply that benefit many times as you tap into the collective experience of the members. What seems obvious to an experienced entrepreneur is often a revelation for the start-up entrepreneur.

Tap into the experience of the angels

Those ventures which are successful in receiving Angel finance are the luckiest as they have a longer term connection with the Angel Group. Of course, one should not underestimate the fact that the Angels actually need the venture to be successful for them to achieve a good return on their investment. Nothing motivates an investor like skin in the game.

The investee firms I have met with have an Angel assigned to them as a Director who has a close relationship with the management team. The investee firm also provides a regular update to the Group and thus has the opportunity to discuss problems and strategy with a wider group of experienced investors. The collective experience is a very powerful force in assisting the venture to be successful.

During the investment due diligence stage of Angel investment, Angels will get a very good understanding of the venture and provide feedback to the entrepreneur on ways in which they could improve their business. Not every business is suitable for Angel investment but even the ones who have applied for Angel investment have received free advice and many have gone on to develop personal mentor relationships with an Angel who has an interest in their venture.

Being an entrepreneur can be a lonely journey. Very few people you meet in life have a passion for business or an understanding of the journey which the entrepreneur takes in starting and developing a business. For a young entrepreneur, the opportunity to discuss their business with successful entrepreneurs is good for the soul as well as good for the business. Whether the entrepreneur is successful in raising Angel finance or not, gaining access to this level of experience is truly worth the effort.