Posts Tagged ‘entrepreneurs’

Actual “Skin In The Game”

Friday, July 27th, 2018

Having “skin in the game” as most people understand it, the amount of personal money at risk, is one of the biggest myths in private company investing. If you are willing to be intellectually honest, it is about the symmetry of risk and reward amongst the key constituents and the personal consequences for each individual after they are done with the investment. Specifically, putting your “neck on the line”, is the sum of four elements: “financial” (impact on personal/professional lifestyle choices), “intellectual” (trust in your intellect and talent), “social” (impact on family, friends, communities and so forth) and “cultural” (impact on the beliefs that inform your attitudes and behaviour). Work that out and you can really see what the actual alignment is, not what people say it is.

© James Berkeley 2018. All Rights Reserved.

Killer Language For Entrepreneurs: Strengths

Sunday, June 3rd, 2018

“Why are you smarter than your peers?” To know your unique strengths, to encapsulate them briefly in a powerful sentence or two, and to place them in the context of your audience’s immediate improvement, is a rare skill. 90% of responses from entrepreneurs are “weak”.

©  James Berkeley 2018. All Rights Reserved.

 

 

Snow Joke

Monday, February 5th, 2018

Climbing out of a snow drift back onto a piste for a first-time skier is hard if you have never done it before, “raising money” from investors is equally hard for a first-time entrepreneur or private equity manager if you have never done it before. I have helped tens of people with both challenges. Yet I run into smart people weekly, who have been a success in the past but refuse to act today like a success when it comes to investing in their own development.

The common factors for success are do you possess the requisite combination of skills, behaviours and expertise to accomplish your goal (climbing a mountain or raising a fund)? If not, can you find someone, who has successfully accomplished what you are seeking to do, and possesses the skills and volition in the real world to help translate and transfer their success to you (qualified expert)? If you can, hire them. If you cannot or even refuse, you are seeing the problem. The pathway is either excessively risky or ambiguous for even experienced individuals or your own behaviour is contributing to your difficulties. Which is it?

© James Berkeley 2018. All Rights Reserved.

Poverty Advice

Wednesday, December 20th, 2017

There is a word for entrepreneurs and small advisory businesses that insist on only rewarding their employees with hard dollars for successful business they can touch, “sharks”. There is a word for employees, who voluntarily accept those terms, “plankton”. You might enjoy, as I do, recreational gambling (horses) for intellectual interest and fun but why would you commit to that bargain when seeking to feed your family? Unless of course, you enjoy living with a constant fear of falling over the cliff edge, are desperate or are merely seeking to find lifestyle work (substantial means). As an entrepreneur, why would you think that is a fast track to building a powerful, sustainable and profitable business? Clueless.

© James Berkeley 2017. All Rights Reserved.

Capital Reality

Friday, December 15th, 2017

I just finished reading a quite brilliant book, Lifestorming by Alan Weiss and Marshall Goldsmith. Marshall reminds the reader of one of his most powerful learning points from arguably one of the smartest minds over the past century, American businessman, Peter Drucker. I smiled when I reflected upon how frequently I am asked to correct this behaviour in my own work, particularly amongst entrepreneurs and private equity investors building businesses.

An excessive amount of time is wasted

  • Trying to prove how right we are (brilliant idea, investment decision-taking) and how good we are (vanity) with ourselves and our key constituents when the real objective should be to maximise the positive difference we are able to make in the life we choose to lead, and the world we live in.
  • Trying to control events or issues where we have ceded or have zero power over the outcome.

The private equity or venture investor doesn’t have to invest. The entrepreneur doesn’t have to accept the investment. When they do accept majority investment, the entrepreneur ceases to have the ultimate decision-making power. Don’t whine or somehow think you retain superpowers, you really don’t, concentrate on making a positive difference within those constraints. If you don’t like the constraints, let it go and move on. The same applies to capricious General Partners feeling that the private equity model is underappreciated in the wider world or when power has shifted from their investee businesses to their customers or competitors.

A case in point, yesterday’s headline sale to Disney of large chunks of the Murdoch empire, is just that recognition that the Murdochs cease to have the power to positively impact their family’s and their assets’ future within the constraints laid down (market competition). Letting go is a common sense response, nothing more.

© James Berkeley 2017. All Rights Reserved.

UK National Business Awards 2017 Re-cap

Friday, November 17th, 2017

Brains, beauty and entrepreneurial endeavour were celebrated on a searingly loud night at the Grosvenor House Hotel on London’s Park Lane, a passing resemblance to X Factor.

When “Lords, Ladies and commoners” were asked to take their seats, Sir Mo Farah burst onto the stage and broke the first royal protocol, telling us the private thoughts of The Queen at his knighthood ceremony earlier in the day. “Aren’t you retired?” Well not quite, we might see him on the final day in Tokyo 2020 chasing a marathon gold.

On a day that awards host, UBM, announced impressive half yearly figures, we learned the secret of their success, maximising profit per square foot. PR supremo and philanthropist, Charles Watson, media lawyer Mark Stephens (without his former WikiLeaks client, Julian Assange) and an eclectic crowd including me were squeezed onto a tiny table that resembled the docks at Sassoon Fish Market in Mumbai.

Three personal favourites among the tremendous British entrepreneurial success stories recognised on the night.

Bill Holmes and his business, Radius Payment Solutions, winner of the Inflexion Private Equity Entrepeneur of the Year Award (I was a judge this year). Chislehurst-born Bill has created a gargantuan global fuel card and telematics business – current sales close to £1.5 billion – over 25 years. He has given countless employees life experiences and wealth opportunities beyond their wildest dreams while being a huge benefactor for a multitude of community issues in the firm’s hometown, Crewe, in the UK’s northwest region. To top that he has brought up two wonderful daughters, who are in their early twenties are pursing their own passions with great success and energy.

Children’s food pioneer, Annabel Karmel who is a walking and talking example of taking a life-changing experience and doing something meaningful with it. Not content with being a celebrated author, adviser, marketeer and creator of innovative products, Annabel is set to bring healthy kids food and beverages to the Chinese. Having listened yesterday to Henrietta Lovell revealing the secrets of The Rare Tea Company’s marketing success selling tea to the Chinese – unprecedented trust and integrity – you would be brave to bet against Annabel doing the exact same thing.

At the other stage of entrepreneurial life, two family friends of mine, Sara and Maria Trechman, and their business, Well and Truly were winners of The Duke of York’s New Entrepreneur of The Year Award. Barely 1 year old, their business is creating amazing all natural snacks and is an object of huge interest amongst UK, and I confidently predict, global retailers. Perhaps The Duke had other priorities this week but I bet it won’t be long before he is looking for the glamorous photo opportunity (without the dodgy lighting). Well done too to my Aunt Alice, who had the fortitude to follow her instinct and back them in their first raise!

© James Berkeley 2017. All Rights Reserved.

 

 

It Is Really Not About You

Friday, November 10th, 2017

 

Why do so many seasoned, and less seasoned entrepreneurs seeking to attract new investment shoot themselves in the foot? They are rarely short of industry knowledge but they are woefully lacking the process skills and critical thinking to attract serious investors. Acquiring investment is about investors. An investor validating their own judgement, no one else’s.

Yet all I here at the outset, is how great the entrepreneur’s business skills and judgement are, wrapped up in their business model and growth plans.

When I push back and ask, “what” (strategy) have/are you doing to help your ideal investor validate their own skills and judgement after they are done with your investment? I am invariably met by a blank stare. That is compounded by my supplemental question, “how” (tactics) have/are you planning to help your ideal investor validate their own skills and judgement when they are done with your investment?

In the absence of a strategy and tactics for creating powerful, sustainable and profitable partnerships with  investors, an entrepreneur’s mission will never be met and manifest. Here is three powerful lessons from my most successful clients:

  1. Raising, deploying and realising capital is a “process”, not a small number of events. It has a “before” (trust, relationship building, conceptual agreement culminating in agreed terms), “during” (effective implementation, impressive value creation, robust risk mitigation) and “after” (planned disengagement, rapid realisation of committed capital plus impressive gains, efficient remittance of resources). Or to put it crudely, cash and resources “in”, cash and resources “out” / time period.
  2. Timing has a “hierarchy of priorities”. (1) the investor’s financial, intellectual, social and cultural needs (most only think about the first need and rarely consider how those are changing in the lifetime of the investment), (2) the availability of an appropriate exit to ensure the investor’s objectives are met and (3) the  future of the business.
  3. They think and act like a successful investor. An investor thinks with logic but acts on emotion, although in some cases the latter might be as heard to discern as Robert Shaw’s face in that infamous card game on the smoke-filled train carriage to Chicago, in my personal favourite, The Sting.

Uncovering The Investor’s Logic and Emotional Reasoning

  1. The reward logic behind the deal. How might it meet or exceed the investor’s need for capital preservation and capital gain, the return on the investor’s intellectual time invested, the social impact met and the cultural benefits accrued (for example, greater affinity with like-minded investors)?
  2. The risk logic behind the deal. What is the seriousness and probability of foreseen and unforeseen obstacles with the deal preventing the investor meeting or exceeding their desired outcomes? Then, what preventative and contingent actions can realistically be applied to arrive at the deal’s “ultimate net risk”?
  3. The sum of the above is the investor’s “great deal” logically. We are not finished yet!
  4. The emotional rewards behind the deal. How might the emotional imperatives of the investor (“reward”) be transformed (repute, peer recognition, trusting relationship with the General Partners and co-investors, promotion prospects, larger bonus and share of carried interest, ego, greater responsibilities, career development, future capital made available, new fund created, more impressive future dealflow presented and so on)?
  5. The emotional risks behind the deal. What is the seriousness and probability of foreseen and unforeseen obstacles with the deal preventing the investor meeting or exceeding those desired outcomes? Then, what preventative and contingent actions can realistically be applied to arrive at the deal’s “ultimate net risk”?
  6. The sum of the above is the investor’s “great deal” emotionally. That is what they are going to make their final decision based on. Are you investing sufficient time and energy in the right area? Are you thinking it through smartly? My guess is most entrepreneurs are spending 90% of their time on the logical reasoning and perhaps 10% on the emotional reasoning when it probably needs to be inverse. Why would you do that?

The smart readers will quickly grasp that a PowerPoint deck or teaser is largely worthless at addressing the latter. You need absolute credibility. You need to take time to build a peer-level trusting relationship. You need to ask powerful questions in a way that the investor is willing to reveal his or her priorities. The shorter the question, the more the investor will reveal. It crystallises it for them. “What are your hopes? Why? What are you fearful of? How did you get to your position?” Frame the question, listen and follow up in a smart way. You cannot coerce or motivate them.

Your job, as an entrepreneur, is to aggregate and connect the dots for the investor. To convert, the credibility and seductive rapport into committed capital with the use of powerful language and a compelling interface for the  investor.

After reading this you may very well panic and spot a yawning gap in your skills and techniques. That is OK, find an entrepreneur, who has done what you successfully seek to do and who can translate and transfer it to you.

A word of warning, a great many advisers don’t qualify, nor do a great many entrepreneurs, who are inept at the translation and transference. Hire qualified advice sparingly.

© James Berkeley 2017. All Rights Reserved.

 

Transformation of Sports Betting

Wednesday, October 25th, 2017

A recent conversation with one of the most colourful characters in global sports betting, Harry Findlay, reminded me how rarely most entrepreneurs have a truly transformative idea.

The advent of betting exchanges, in particular Betfair, has had a 3-dimensional impact on European bookmakers (margins – the profit on every transaction; velocity – the speed at which they collect cash; volumes – traded bets).

Today’s sports betting business resembles a fraying rope, at one end, the commodity or mass market giants, Bet365 and Paddy Power Betfair dominate with huge marketing budgets driving increasing mobile betting volumes amongst the £5-£10 recreational players. At the other lie a small number of “premium” boutiques and large international (Asia) betting firms, competing on differentiated service and a volition to “lay” a £1,000+ bet.

Mass-market sports betting is akin to retail supermarkets. High volume, low margin and viciously cut throat competition will prevail over the next 3 years.

The “premium” player end is no less competitive. The need for scale, a powerful brand, the passion and competency to deliver a high-touch premium customer experience and a competitive balance sheet will defeat many of today’s incumbents. Too small, too niche, too busy prioritising commodity players and too weak.

Yet the sports betting industry despite increased regulatory pressure, changes in societal mores and disruptive technology, doesn’t lack for wannnabe entrepreneurs. Most though never end up with anything more than a small business. There is a pressing need today to think bigger.

The big opportunity in sports betting is not in isolation, a rival trading platform to Betfair. The transformative idea is a business that is able to transform the market size exponentially, professionalise it and turn it into an institutional quality, alternative investment class. That’s why businesses such as Stratagem, Smartodds and Starlizard are an object of serious interest to investors, outside the confines of the professional gambler’s lair.

The naysayers decry the randomness of sports results, to support their argument that this will never happen. What is not random about catastrophic Gulf hurricanes, Mexican earthquakes and California wildfires?

Parallels can be found with the way that insurance risk was “trapped” amongst insurance and reinsurance players upto the late 1990s. Offering non-correlated risk to professional investors and healthy yields, today close to 20% of the total pie is now diverted to the capital markets via insurance linked securities. Why should sports betting risk be “trapped” amongst existing incumbents with relatively small balance sheets?

Just as with insurance risk, the evolution requires a business with

  1. Discernible and practical value. Superior data and analytics to turn data into information, information into knowledge and ultimately, knowledge into wisdom consistent with the investor’s strategic goals.
  2. A clear, accurate idea of the professional investors of today and tomorrow?
  3. The intellectual firepower to attract and retain professional players and investors (structuring and matching capital with risk)
  4. Intelligent pricing skills and judgement (quantitative and qualitative).
  5. Commitment to constant innovation and reinvention (new products, new markets, new technology and new relationships)

Perhaps that is one of the above businesses or an entrepreneur quietly making waves but yet to attract the glare of media attention. Either way, the sports betting industry is primed for dramatic reinvention just not in the manner most market observers have presumed.

© James Berkeley 2017. All Rights Reserved.

Interview With Me: Forbes

Wednesday, October 25th, 2017

In a recent interview with Forbes contributor,  Chris Cancialosi, James touches upon the often hidden price of entrepreneurship, the mental consequences and self-worth issues that bedevil even the most seasoned entrepreneurs, irrespective of the business size.

The Quiet Price of Entrepreneurship

https://www.forbes.com/sites/chriscancialosi/2017/10/18/the-quiet-price-of-entrepreneurship/

© James Berkeley 2017. All Rights Reserved.

The InsurTech Deficit

Tuesday, October 3rd, 2017

Who has done anywhere in the world what you would ideally like to accomplish? Who can help you translate that knowledge into wise decision-making consistent with your own strategic direction and goals? Who can help you acquire the skills, behaviours and expertise to institutionalise that learning?

We have reached a point in certain areas of tech, not least insurtech, where the numbers of entrepreneurs and advisers entering the arena weekly are greater than the number of entrepreneurs and businesses globally progressing from Seed stage to Series C stage. This week in Las Vegas and London, predictably, there will be thousands of promises made. The reality is that there are very few qualified advisers or investors. Certainly those that pass the above “litmus test”. Be careful, very careful.

© James Berkeley 2017. All Rights Reserved.