Thursday, 28 February 2008

Stressy stressy moo moo

My son used to have an interesting technique for helping the situation when his elder sister was stressed. Once he spotted that tension was rising, a smile would creep across his face and he would follow her around chanting "stressy stressy moo moo, stressy stressy moo moo". He has learnt that this technique does not in fact help people to relax. My daughter has explained this to him. Clearly. He now understands. He doesn't do it anymore!

Handling stress in yourself, and in your team, is part and parcel of running a start up. Some people think that entrepreneurs are superhuman. They are risk takers. They don't sleep. They laugh in the face of disaster. And they never get stressed. How we admire them! Well, sorry to burst your bubble but it's just not true. We entrepreneurs get stressed just as much as anyone else.

The problem is that we entrepreneurs don't like to admit it. We have to hide it. No-one must know. We bury it deep and bottle it up. But stress will always find a way to bubble to the surface. And it's vital that you recognise the signs early and you do what you need to do to find your balance again.

If I'm alert, I can recognise the signs in myself. My sleep patterns go wonky. I start to go to bed later and later. Midnight. 1am. 2am. I find I'm hunching up my shoulders. My back (left side) gets stiff and I keep doing stretches. I feel like there are tears deep behind my eyes for no reason. That's when I know enough is enough.

Now comes the beauty of being an entrepreneur verses being a corporate wage slave. If you work for some big company, no matter how senior you are, you get locked into a vicious cycle. You have to go to that next meeting. You have to answer your bosses latest email. You have to do your difficult team members quarterly review. You just go on that few weeks too long and then if you are not careful you crack.

But here's the beauty of being an entrepreneur. If you feel yourself getting stressed. If you feel you are pushing things a bit too hard and you don't have time to think, you JUST STOP.

Hah ! How about that then?

You are the boss. You are The Man. You clear your diary and take a random day off. Laugh when your alarm goes off. Switch your phone off. Slob around for the morning watching Day Time TV. Go swimming at lunchtime. Clear off to the cinema and eat a large box of popcorn in the afternoon. Browse around a bookshop for a couple of hours and buy nothing. And just feel the stress melt away.

Don't even worry for a moment abut your business. It will all be there when you come back. All the excitement. All the challenges. The emails. The breakthroughs. It's not going anywhere. So take your time, take a break and go back refreshed, de-stressed and re-energised.

At least that's what I do. So don't bother calling me at Garlik tomorrow because I won't be there. I'm off to the movies. I'll see you Monday.

Oh, and if you see me mooching around a bookshop, DON'T follow me around chanting "stressy stressy moo moo".

Thursday, 21 February 2008

Does India really exist?

I have heard of India but I have not been there yet. I am told that it has a population of over a billion people and about 60m internet users. 60m - that's huge. Double the UK's internet population! But when I started prodding to understand the internet market a bit better, it sort of melted away. Raising the question in my mind - does India really exist?

I read the research reports and reviewed the stats and on the surface the untapped Indian market looks like a huge opportunity for an online proposition like Garlik's, but whatever the books and reports tell you, as an entrepreneur there is no substitute for straight conversation with guys "on the ground" to tell you what's really going on.

I spoke to my "guy on the ground" and said "hey, guy, what's going on, on the ground?". He broke it down like this

- yes, there are 60 million internet users
- but only about 10 million of them use the internet regularly by which he means 2-3 times a week
- and he claims that for the most part they use it for straight forward email and chat, not for surfing and transactions
- the big growth areas, he believes, are travel, matrimony and jobs sites. So, if you want to make a fortune in India launch a site to hook you up with a partner and fly you both off to your new job on the other side of the country and you are made!
- he reckons that probably about 2 million people really have internet integrated in to their lives in the way that we see in the UK and USA

So when I explained Garlik's online proposition to him, he said the actual market available to us today would be close to the 2m active user population. That puts things in to perspective.

Unless some kind person let's me know different it looks to me as if India may not be ripe for a large scale, full-on web proposition right now. That's why it's so important to get behind the numbers and get a "guy on the ground" to give you the real deal - in any market, from London to the Valley to Bombay. Find your guy on the ground and listen hard.

Mind you, my guy did say that there are now 250 million mobile phones, including 25 million advanced handsets. Now THAT'S what I call a market!

Thursday, 14 February 2008

Paris on Valentines Day...without my wife!

Today was Valetines Day and I spent it in the beautiful city of Paris...without my wife. Call me a "love rat" if you must (and okay it is true that I appeared on an ITV programme about Love Rats, but I deny everything!) but sometimes a man's gotta do what a man's gotta do.

The reason I was in Paris on today of all days was that I was invited to an event and awards ceremony at the French Senate organised by the Netxploratuer group. Garlik was honoured to receive an award as a "Top 10 Netxploratuer of 2008" company and I went to speak at a session on digital identity and to collect the award.

I thought it was a bit odd arranging it to clash with Valetines Day until someone pointed out to me (too late) that I was probably supposed to use the opportunity to take my wife with me. Whoops! Sorry!

Anyway, I jumped on the 9.13am Eurostar from the very impressively refurbished St Pancras Station and off I went. I haven't done that trip for a few years now and I must say it's really impressive to get on a train with no fuss or bother and just over 2 hours later you are in the heart of Paris. That's less time than it usually takes me to get to Manchester and much less hassle than getting a plane.

I have spoken previously of my difficult with languages, so I was relieved to be picked up by an English speaking limo driver at Gare du Nord and whisked off. I was, however a bit taken aback when the limo stopped at a posh hotel instead of the Senate, the door was opened and the driver said "Here you are at the hotel, sir, I will pick you up in an hour". I politely stepped out of the car and he sped off leaving me scratching my head. The hotel doors were opened so I swept in as if I knew where I was going and strode around the foyer for a few minutes whilst the staff looked at me suspiciously. Anyway, after wasting lots of time testing out the hotels various rest-rooms, I wandered around the streets for a while before heading back to wait for my very jolly and very assertive driver (Note to self: in future must stand up to French limo drivers when they chuck me out on to the street unexpectedly).

The Senate (we finally got there) is based in the incredible Palace du Luxembourg (see picture). I arrived halfway through the first day of this two day event and it was really quite lively. There is a strong, emerging entrepreneurial spirit in France and there was a great mix of French start up guys, corporates interested in inovation and politicians and policy makers present. I also bumped in to Chris Kelly, Chief Privacy Officer of Facebook who sat in on my session, and I narrowly missed Mitchell Baker, Chair of the Mozilla Foundation who had to leave promptly after her talk that morning. The French media was there in force and I somehow managed to squeeze in six back to back interviews.

There is a lot of interested in digital identity in France, if this audience was anything to go by, but the nature of the discussion reminded me just how culturally dependent attitudes towards privacy are. I shared the stage with a professor, who seemed to be suggestion that we should all effectively disguise our online identities by using avatars and that there should be a tightly controlled central database that provided the one and only link between your real world identity and your anonymous avatar. Quite a vision and one that I did not fully subscribe to.

The other thing that struck me is that the issue of identity theft that we face in the UK and the USA, does not seem to have hit France in a material way (yet). One suggestion was that availability of credit is more limited and tightly controlled so it is much harder to steal someones identity from online sources and then just go ahead and apply for credit in their name.

The third interesting observation was the strong presence of non commercial "good cause" type of initiatives in the list of Top 10 companies. The winner of the overall Grand Prix was Psiphon, a very impressive human rights related project from Canada providing uncensored internet access to people who live behind state firewalls. It's a great project and a very worthy overall winner, but I think in an equivalent UK or USA tech start-up awards event it would fall in to a different cateogry to the commercial ventures. In fact one interviewer asked me, somewhat unexpectedly, "if what Garlik does is so important for the individual then why don't you offer the DataPatrol service for free?". I didn't actually say "Because I would end up living in a cardboard box, eating fresh air" but it wasn't a question I typically get from UK or US media.

The awards ceremony itself was very plesant. The guest of honour was Jean-Pierre Raffarin, the former Prime Minister of France. Each of the "Top 10 for 2008" winners including Garlik, were called up to receive the award and say something about the importance of their company to society, more speeches, more applause, more networking, time for two more quick interviews and then off home. Back by 11pm, tired but pleased I went as I met some interesting and useful contacts, reconnected with a couple of guys and it is always nice to be recognised and get a pat on the back when the team's done a good job. I think we might treat ourselves to a bottle of bubbly tomorrow (hopefully my VCs don't read this, and if they do don't worry it will be very cheap bubbly. Possibly just sparkling water. Prepared by filling a glass from the tap and shaking it hard :-)

The actual award gift itself is something quite special and unique. It is a bronze statue from West Africa created using the cire perdue or Lost Wax casting technique, which was entirely appropriate as my first start up tech company is called Lost Wax, named after the same West African sculpting technique. Some things just feel right.

Saturday, 9 February 2008

Grab an umbrella - a storm is brewing

Let's face it. We are heading for a tough year for start up businesses. The slow down hasn't hit hard yet and it may not hit at all but I am betting that it will, and any smart tech start up guy will be thinking the same way.

You can see the signs. Wobbly house prices. Tightening consumer credit. Slow down in tech spending. Balance of stories in the business media shifts to negative. There is nothing new here, we've seen it before, we know how it plays out and we know how to survive it. Remember 2001-2002? Ouch!

The conversations that I hear as CEO of Garlik today are almost identical to those I heard as CEO of my previous tech company in 2001/2. For the first few months everyone pretends it's not really happening. We all say "oh, yes, there are some macro trends but it isn't impacting my business". The ever optimistic entrepreneurs all have some argument about how their unique value proposition will be unaffected. In fact, it may be true that business is really good and may even feel like it is accelerating (you know like those cartoon characters whose legs whizz round really fast when they've just run off the edge of the cliff, before gravity takes hold). IT Directors at big companies smile knowingly and explain that spending plans don't change that quickly and its business as usual. VCs claim with confidence that there is a wall of money desparate to be invested and good deals always get funded so everyone should calm down.

But when it turns bad, it turns quickly. Everyone catches a cold and the tech entrepreneurs who don't understand what's going on or are slow off the mark get hit hardest.

Here's what happens.

Executive Committees in the big companies start to have conversations internally. Externally they say "business as usual" but internally they just start to tighten things up a bit. I've been an IT Director, I've sat on those exec committees. I know how it works. Your Finance Director has "a word". The IT Director sends out the message to his guys that it's time to think a bit harder before signing stuff off. No major cuts (yet) but the guys get the message and pass it down the line. Project managers become a bit more cautious about giving the go ahead. They hold a bit of budget back for when the cuts come (hey, they can always spend it later after all). They lean away from small tech companies because if a downturn does come they don't want to be left doing business with a bust start up company, however clever its technology. Besides, the technology will still be there in a years time so what's the hurry?

Tech start up companies selling to these guys hardly notice that things have changed. Sure, meetings take a bit longer to set up, but they still happen. Nothing on the sales pipeline goes away, it just gets a bit sticky, like walking through treacle. Decisions are not quite getting made, but "hang in there, we are still very, very keen" is the message that the tech guy is given by the client. Decisions that previously had to be made urgently before the summer for "time to market" reasons seem to drift towards the autumn. Everything drifts to the right. Have you noticed it yet? Watch and watch very carefully.

The VCs keep looking for deals and if asked they say "sure the economy looks shaky but nothing has changed on our side". But the more experienced guys in the investment committees know what to do and they start to guide things behind the scenes. Keep the deal pipeline full, keep looking at the new deals but don't be in a big hurry to green light anything. Talk in terms of more agressive pricing but don't indicate that deals may actually not get done. Don't be the first in the VC community to pull the plug. Doesn't make you look good. But read the signs across the portfolio carefully. Are we seeing all the pipelines drift to the right yet? Are exists going to take 12 months longer? If yes, then let's hold on to our funds because there's a lot of financing of existing companies to be done yet.

When all this watchfulness is going on, you know you are at a critical point. This is the stage we are at now, from what I see and hear. One or two negative events can trigger the next stage and then things move quickly.

Companies move first. They trim their budgets back by 5-10%. Not much in the grand scheme of things, but actually that means they trim their innovation budgets back by 50-100%. The "new stuff" grinds to a complete halt, even if it's just for 6-12 months or so.

The impact on the tech guys is harsh. Pipelines that looked really solid just a month or so before vanish completely. 12 month sales cycles become 24 month sales cycles. Base case predictable 2008 revenues suddenly halve and even halve again. Monthly cash burn leaps and suddenly hundreds of tech start ups have an unexpected funding requirement in the next few months rather than over the next couple of years.

But just as that widespread funding requirement emerges, the VCs shut up shop to new business. It's not a question of the price of deals, it's that the door practically closes to new deals completely. All the VCs look internally. They look at their own, existing portfolios and keep their (financial) powder dry in order to ensure that their existing companies survive this coming difficult period.

So, if this rather bleak scenario turns in to reality, what should a tech start up company do? First and most important "Don't Panic". It can be ridden out, but it requires smarts and discipline.
Firstly, take a hard look at your 2008 budget and run the following scenarios. What does it look like if you get (a) 50% and (b) 25% of the revenue you are expecting in 2008? You don't need to cut costs immediately but you need to know exactly when and how to cut costs if you find yourself in (a) or (b). No guess work. Just plan it out.
Secondly, keep your current cost base tight. Were you thinking of taking a slightly larger office as you are a bit cramped? Don't. Sit tight. Were you going to add one or two extra staff just to ease the pressure? Don't. Sit tight. Do you still fly business class? You fool. Get back in coach! You don't need to go crazy on costs, but you just keep everything nice and tight for now.
Thirdly, raise cash now. Right now. Put cash in the bank, even if it looks like costly money that you might not need. Do you really want to be out raising money along with several hundred other desparate start ups in 6 months time? Don't get fancy on terms and valuation - in a downturn cash counts and everything else is just noise. You want to make sure that in a scenario where you get 50% of your expected revenue for 2008, you still have enough cash to last you a good 12-18 months, and that even if you get 25% of your expected revenue you will still last 9 months and have time to make the rapid cost cuts you will need to.
So, grab an umbrella, a storm is brewing. But, hey, we've seen it all before. And sooner or later, the sun shines through, the rainbow comes out, the rubbish has been washed away and the real entrepreneurs are still standing and smiling. See you there :-)

Thursday, 7 February 2008

The Route to 10 Downing Street

The route to Number 10 Downing Street is never straight. It can take some interesting detours. In my case, my journey to No. 10 this evening took me via online dating on TV and a brush with Silicon Valley.

About a month ago I received an invitation to visit Number 10 for a reception hosted by the PM, Gordon Brown. This came about as a result of the educational charity work that I am involved in. Today was the big day and I have to admit to being quite excited (yes, sad I know) as I have never been to Number 10 before. Besides I thought it might be a chance to make some good contacts for my BIG project.

However, first things first. My first stop of the day was to spend the morning with an ITV crew filming a piece for next week's "Tonight with Trevor McDonald". It's going to be a two-part special shining a spotlight on the new wave of identity fraud taking place on online dating sites. Think you've hooked up online with a Beyonce look-a-like model , my flirty, fifty year old friend? Think again, mate, and prepare to have your wallet emptied by a 17 year old youth with acne! Garlik has done research in this area so I was providing some expert commentary. My bit took about 2 hours to shoot but I suspect that when it's broadcast on Monday and Friday evening next week, I will be on the screen for 2 or 3 minutes at most!

Then off to the London offices of one of Silicon Valley's premier venture capital firms to tell them about Garlik. "Why?" I hear you ask when we have two major VCs on board already. Well, a golden rule of being a start up guy is that you are ALWAYS pitching. Anyone you meet. Any opportunity. You just keep selling your company. Remember: A-B-C. Always Be Selling (actually that's A-B-S, but that doesn't make sense so...).

I find that it's a good strategy to take potential future investors on the journey with you. So, you tell someone "this is what we are going to do over the next year". Then you do it and tell them "this is what we did, and this is what we are going to do next". You do that too. When you finally get round to asking them to invest, you've built up a track record. They know you do what you say you are going to do. That's a good place to start the real investment dialogue from. So whenever I get the opportunity to tell potential future investors about Garlik, I grab it. Plus these particular guys are plugged in to the heart of Silicon Valley - they know everyone - and you never know what opportunities might come out of that sort of conversation.

Finally it's time to head off to Downing Street. Lined up with the other guests next to the big black gates that guard Downing Street these days. Show your invite and photo id. Go through scanning and searching (and this is just to get in to the street, nowhere near the house yet). Go past the big boys with the machine guns, smile nervously and try not to look too foreign and shifty, immediately causing one to look shifty!

Now we're on the Street itself. It's quite odd. One minute you are on noisy Whitehall, with tourists and taxis everywhere and then you are on this quiet, quaint cul de sac with surprisingly small front doors, number 10, number 11. It makes you wonder what visiting Heads of State make of it, compared to The White House, say. Very English. Understated. I quite liked it.

The door to Number 10 was open so in we went, showed our invites again and left our coats and bags downstairs, piled up in the hall. It's a grand house but it really felt like visiting someone's big, London house rather than the Official Residence of a Head of State. Ok, the pictures of all the past Prime Ministers as you go up stairs are pretty impressive and there seems to be an aweful lot of house behind that modest front door. I think Number 10 is a tardis.

The education chaps were out in force to mingle with us. Lord Adonis, the driving force behind the Academies programme, Ed Balls, the education minister and so on. The other guests were a mix of charity folk, sucessful businessmen and a cluster of wealthy hedge fund guys some of whom I knew from my time at Goldmans. Then the PM appeared in our midst. I say appeared because even though we were all keeping an eye out for him, I didn't see him come in. He just seemed to "be there". Perhaps they have trap doors in Number 10 and he can pop up out of the ground?

Gordon (as I like to call him :-) did a good job of working the room, smiling, shaking hands, pretending to know people and so on. Then he gave a short and quite jolly speech. He told an amusing anecdote about Field Marshall Montgomery. I knew it was amusing because I heard him tell exactly the same anecdote at a lunch event in Davos a couple of weeks ago! He NEEDS to get himself a new jokes-meister.

A little more networking later (I bumped in to a couple of really great contacts) and I decide it's time to leave. I glide out of Number 10, nodding at the doorman as if he was an old friend, tipping my hat to the big boys with the big toys at the front gate and, hey presto, I reappear in the real world, back down to earth on the streets of London. Now, where's my bus pass gone......?

Monday, 4 February 2008

Show me the money

Every now and then an entrepreneur gets called in to brief his investors on how it's all going. Today was our turn to present to "The Money" so off we trooped to their plush offices (they are not called "The Money" for nothing) to pitch our story.

I have pitched loads of times to countless investors and it's something that any budding entrepreneur will have to get used to doing. Over the past decade I must have presented well over 100 times and raised over $30m from angels, strategic investors and venture capital companies. It's always a joy :-)

In the early days, I recall pitching to some guys. It seemed to be going well and they said "I guess you'll be wanting a term sheet before we move forwards?". Too right I said in no uncertain terms. No term sheet, no more conversations. That's the way I operate. Take it or leave it. I looked at my partner for confirmation. He nodded agressively. As we left the meeting I said to my partner "What's a term sheet?". He looks slightly shocked and said "I though you knew".

VC's love jolly japes too. In my previous start up, we once got accidentally copied on an email from one VC firm we were talking to saying "Let's keep talking to these guys until they are short of cash, then squeeze them hard on price". We sent it back politely saying "Excuse me, I don't think this was meant for us". I don't see the young lady who sent that email around the VC scene these days.

You've got to have thick skin though (which I haven't really) because it can be tough at times. I have flown to San Francisco, walked in to a VC's offices, started my pitch and within 10 minutes the main guy has stood up, said "this is crap" and walked out! I have opened my laptop to start my pitch and had the two VCs in the room actually burst out laughing. I have pitched to a hall full of 200 VCs with a strict 5 minute cut off at which point your slides just vanish and the word APPLAUSE appears on the screen resulting in a deluge of noise and laughter even if you are mid sentence. I've sat and talked alone with one of the world's most powerful Silicon Valley billionaire VCs and had his gentle lazer-like eyes drilling holes right through me. It's a tough old game, and some if it is just a sport - like hunting and you are the prey! But stick with it and eventually you will find the investors who are right for you. We did.

Anyway, back to The Money. Today we had a good turn out for our update session. There was Smart Money. Senior Money. Suave Money. Disembodied Money (on the speakerphone) and of course our very own MoneyMate. It was a good session, with some probing questions ("Your product's rubbish and you'll never make any money, ever. Why do you even bother to get up in the morning you incompetent waste of space?" or perhaps I misheard the question slightly :-)

The good thing about this sort of session is that it makes you stand back and take a strategic look at the entire business, which is something that you rarely do when you are in the thick of day to day entrepreneurial challenges. Also unexpected opportunities arise particularly when other guys in the VC firm understand what you are trying to do. For example today we discovered that we have a direct line in to the Board of one of the companies that we have been trying to talk to, and we have a potential link with a global bank who may be interested in Garlik's service.

So if you are an entrepreneur then investors and VCs will be an integral part of your life. Just remember, VCs are good for you. They will make you look good and will ensure that you can eat.

Rather like dentists, really.