By Paul Grant & Matt Arnot
Original set publish date: December, 2011
Paul Grant started coaching with events on topics like how to raise funding based on his experience as an entrepreneur having founded a London based company through private equity and debt finance. The company offered London-wide catering to the corporate and retail markets. He has since been involved in building a network of over 500 business angels at Capital Partners Private Equity Ltd and more recently at BA Capital Ltd, while assisting young businesses with fundraising and coaching. He has also the founder of “The Funding Game” seminar series which offers practical guidance and networking opportunities for entrepreneurs seeking capital for early-stage and growing ventures. Paul’s passion is playing a part in helping other entrepreneurs launch and run their own successful businesses.
Matthew Arnot is blogger, business analyst, and ghostwriter living in London, England. He first became interested in startups after creating his own proofreading company based on his experience at the London School of Economics. Shortly thereafter, he worked in sales and then as a business analyst at Groupon UK which is arguably the fastest growing company in the history of the internet. He is now developing his own startup by building on his academic and work experiences. He writes a blog www.professornerdster.com and he has also ghostwritten Don’t Screw Up Your Bride’s Wedding Day.
This How To Bootstrap A Start-Up guide is designed to help you avoid the most common pitfalls when creating a startup. If you take the time to quickly read this eBook, it will fast-track you towards business success, and it will save you countless hours of unnecessary work that startups commonly create for themselves. This eBook is built around the central idea that bootstrapping is the best way to create a functional, and thriving business.
Only after you have proof of concept as a bootstrapped company can you begin the process of seeking investment. The techniques, and real life advice contained in this eBook come from years of aggregated knowledge from expert literature in business, as well as the direct experience of Paul Grant at BA Capital Ltd, and his own startup experiences in the early 2000s.
Avoiding The 99%
Starting a business is an attractive path for ambitious, self-motivated, and hardworking people. After all, being an entrepreneur provides greater control of your life, as well as the freedom to think creatively, and to take on the responsibility for your own successes, and failures. The problem is that it is hard work, risky, and there are huge barriers to entry in today’s business environment. Most often, so-called entrepreneurs end up doing nothing more than doing the classic case of: buying yourselves a job (BYAJ). Since there are thousands of long established businesses already vying for market share, the challenge of creating a successful venture that is scalable is a rather daunting one.
You will need to avoid the mentality of the 99% of entrepreneurs who have failed, and instead seek to be part of the 1% of entrepreneurs that convert their aspirations into successful scalable businesses.
Take the Blue Pill Or the Red Pill
Whether you are aware of not, every entrepreneur makes a choice between dealing with the reality of the challenge that awaits them, or sugarcoating their strategy with the cozy illusion of ‘common-sense-know-how.’ It is much easier to simply approach business as a game founded on the logic of common-sense-know-how rather than the extremely unstable work of startups. There is a low chance that you will raise equity with this Easy Root/Blue Pill strategy. As Paul Grant’s experience suggests, VC/Angel Groups will not be interested in a poorly conceived product.
In this eBook, we are asking you to make a serious choice. You could take the Blue Pill which is a primrose path to buying yourself a job. Or take the Red Pill which this eBook outlines. Many people take the Blue Pill which consists of following the conventional steps to getting a startup going; creating a detailed business plan that you will spend months creating, and then seeking out investors with your insistance that you have “the next big thing since Facebook.” Taking the Blue Pill will even include asking friends and family to fund and support, in order create an inflated sense of success in your entrepreneurial endeavour.
1%…typical success rate for start-ups that take the Blue Pill.
Why have so few entrepreneurs succeeded? You can follow the common-sense approach BUT this lower performance happens because they haven’t played the game well. In 99% of the startups, there is no proven revenues, and the product has not been tested. 1 out of 100 entrepreneurs actually acquire funding of + £250K from Venture Capital of otherwise.
These are Paul Grant, and VC/Angel Groups findings. In fact, the 1% figure is actually an optimistic reading considering how many startups are never recorded..
The 99% Approach….(Road to Buying Yourself A Job)
Step 1 An entrepreneur has a great idea, and has the guts to see it through!
Step 2 Sets out writing a detailed business plan: a robust business plan, which experts have been paid to ensure will work. Some entrepreneurs buy business plans, and end up spending a year working on a business plan. There are some people who spend £50,000 on business plans, and only get £5,000 back in investment. Everyone thinks it is all about the plan, but continually fine tuning this blue print for the business actually detracts from reaching your funding goal.
Step 3 In Search of Capital: while people aren’t even keen he/she flies to Silicon Valley where they meet VCs who are disingenuous, and rarely say “no, thanks” for fear of passing up the next Zuckerberg. There is no margin for saying “no.” For the VCs, in other words, there is no reason to turn someone away completely, but instead they will spur on an entrepreneur and give the entrepreneur false hope about the possibilities of successful deal being made after further research. Plans are refined, and entrepreneurs then go back with a better business plan, and a bigger team, but it is a waste of time, and have to get salaried jobs.
Step 4 Entrepreneur quits after a year of searching: they might have good team etc and they blame the business plan, or the company who wrote up the business plan for them, perhaps some interest occurs but disappears before any contract or commitment to investment occurs.
The Choice Is Yours
Yes, of course, there are UK-based entrepreneurs who have received millions of pounds in funding with a business plan no longer than just 10pages, and no revenue to show for his project. Random cases of such success are rare pre-2008 case, and in the end, almost all startups fail to couple equity capital with sustainable revenue growth. BUT they are not going about it the right way. Otherwise, instead of taking this Blue Pill for the easy road forward, we encourage you to take the more rewarding Red Pill which asks you to strategically assess the reality of your situation in. The Red Pill means thinking strategically about how to maximize your potential as an entrepreneur. Where you might find yourself conducting several pivots in your value proposition because of new information about what customers really want (whether they know it or not).