So you want to be an entrepreneur? Think again!
As I was walking to a meeting on City Road in London, approaching the iconic (some say butt ugly) “Silicon Roundabout”, I overheard a couple of young ladies talking about their dream of becoming entrepreneurs. At first, I was like: “Yeah, this is so cool” as I remember the days not too long ago (10–12 years) when being an entrepreneur was seen as someone who couldn’t get a “proper” job. I remember it so clearly when I decided to take the plunge into the entrepreneurship abyss, how many of my friends and family members wondered if I was drunk when I made this decision. But since I don’t drink much, to their horror, they realised that it was actually a conscious decision.
Nowadays, being an entrepreneur is celebrated and, dare I say it, seen as cool by the younger generations. But it wasn’t until I heard the reasons the young ladies gave that I started to reminisce and think back to my own journey. One said something along the lines of: “Being an entrepreneur is like being free. I can take as much time as I want; no bosses to worry about. It’s, like, awesome!” And the other replied: “Yeah, you can do all of that while making lots of money.” That was the point that I couldn’t help but smile, and then we split paths before I could hear more of the same conversation I had with my wife and business co-founder 15 years ago.
But this isn’t the first time I’ve heard or met people who say that they want to become entrepreneurs. I find it really inspiring when I see a growing positive attitude toward entrepreneurship, from the public, the media and even the government. Ever since the big financial crash in 2008 (yes I’ve been through the painful experience of being an active entrepreneur during that surreal time in recent history), doing it alone has become a legitimate alternative to having a “proper” job, especially for those who have been made redundant. Above all, governments across the world, particularly in the UK, have finally realised that the corporate world is indeed as vulnerable as the rest of us, despite their wealth, power and influence. I remember at the time feeling as if the world had suddenly called for the superhero startups to come in and save the day.
And, rightly so!
This positive attention has also inspired the younger generation to believe that they have the opportunity to innovate in a world where technology and the Internet have truly been democratised. But, and a very big BUT… If you want to become an entrepreneur, especially in the tech world, then you need to think again. It’s not as plain sailing as you might think. If anything, it is the exact opposite of what was said by the two ladies I mentioned above, and many other people like them.
Here are five real pointers that you need to be aware of if you are seriously thinking about becoming an entrepreneur:
1- Forget freedom, it only makes sense in Brave Heart
This is the first “advantage” that budding entrepreneurs think about (and, yes, I thought the same thing when I started), that you will have the freedom of doing whatever you want and not having a boss to bother you. WRONG! You do have a boss, it’s called your users and/or clients (let’s call them collectively “Mr and Mrs Customer”). Although, you have the full control of your timetable, your new bosses, Mr and Mrs Customer, expect your attention 24/7. Yes, they want you to serve them and look after them, even when you are dead tired, or sick, or have a funeral to go to. They don’t give a flying horse of your circumstances. They want you to be there for them as a business. They sound like evil bosses, right?
Well, they’re not!
It is their right to be so demanding. You, the entrepreneur behind your new startup, are expecting them to commit to your products or services, pay for them and make you rich. I actually think Mr and Mrs Customer are the best bosses you could ever have because they are the only bosses that can actually make you very successful. But you have to work your life away to earn it. Some bosses in the “proper” jobs, I would argue, also expect you to give your life away for their companies. But they would never make you rich. Rather, your work will make them rich! So don’t complain when your paying customers expect you to be on your feet and end up losing your freedom that you so wished for. If you accept this with open arms right from the outset, then you are ready to take the first step toward becoming an entrepreneur.
2- Say good bye to spending time with family and friends
In theory, having full control over your timetable and having that infamous freedom of being an entrepreneur means that you get to spend more time with your family and friends. But the reality is, you will spend almost zero time with them, at least at the early stages of your business.
Oh yes you will!
If you are running a family business or, like me, you co-founded your ventures with your wife or husband, even then, you don’t spend the quality time together that you would normally do otherwise. This is probably the worst aspect of being an entrepreneur. If you are like me, someone who loves socialising with your close friends and spending time with your family, then you will struggle. I must admit, this is the part that I really hate about being an entrepreneur. You have to be very selfish, because it’s about you and your company. If you compromise your time serving Mr and Mrs Customer, then you might as well kiss your business good bye. And you know what? Some investors would rather support entrepreneurs who have no social life or family (like young children) or anything that might distract you from your business. I have met many investors like that, and I actually understand their point of view, though I don’t fully agree with it. But this is the reality of business. If you can live with that, then you are on your way and you have just reached the second step toward becoming an entrepreneur.
3- Entrepreneurship is a very lonely world
This point is directly relevant to the death of your social life I described above. But what exacerbates it further is the fact that you will have to spend many days and nights (sleepless nights, that is) on your own working on your master plan, calling potential suppliers, partners, banks, lawyers, accountants, and the list goes on. In the tech world, you need to add more days and sleepless nights of coding and testing, and recoding and retesting thousands of times (literally). If you have a co-founder, then it’s just the two of you or just the three of you, or whatever. It is like moving into a new country, with a culture and language that is foreign to you. So only you and your co-founders (if any) will have to go out there on your own and constantly meet people and network, in addition to everything else that you have to do. If you are an introvert, then this will be particularly challenging.
Having said all of that, the world today is a much better environment for new entrepreneurs, particularly for new tech entrepreneurs. With the continuous rise of tech clusters in major cities around the world, taking on Silicon Valley, not to mention the rise of thousands of new startup incubators and accelerators, it is not so lonely today. But it’s still not easy. When I started in 2003 with my wife, none of these amazing environments existed. We were alone, with the full meaning of the word. We had to build our own network of everything, business partners, investors, advisors, clients, you name it. We did not have accelerators or incubators who could connect us to anyone. We had to go through the Yellow Pages and cold call people every day. How times have changed, and I think it’s great. But it is still up to you to build your own network through these dedicated clusters. They are simply platforms that help you meet people more quickly and easily, though you still need to work hard to connect with the right people — if they want to connect with you!
This means that you have to talk to loads of strangers; present in front of many audiences, day in, day out; work on your pitches to build a consistent message. All of these will eventually benefit you when presenting to customers and investors. Of course, this is in addition to all of the other work that you have to do, with the sleepless nights.
Are you still thinking about your social life? This is your new social life.
Actually, this is your new life. Lonely, surrounded with strangers 90% of the time, on your own in your house/flat/room coding endlessly, coupled with extra dose of caffeine and junk food. If you like the sound of this, then guess what… you’ve just reached step three toward becoming an entrepreneur.
4- Expect to fail and embrace failure!
As a British and a European citizen, I know how society in our region views failure. Us Brits and Europeans, we are terrified of failure as if it is a dreadful disease that turns you into a scary and smelly green ogre. Although you might think that I’m making a joke of this, I am actually pointing out a very serious issue. We are very bad at dealing with failure in all aspects of life. Thus, failing in setting up and running your startup is no different. Here is a very good read about this very issue we have in Europe. Although, this article was written back in 2014, the author’s description of our attitude toward failure is still quite relevant in 2016. Though, I am seeing some improvements in the UK today.
Let me share with you one experience that highlights how badly the UK/EU business world deals with failure. During a meeting with a group of investors, where I was pitching for a seed investment fund for Scicasts, one investor decided to spend most of our conversation about my previously failed company. While I appreciate that this investor probably needed some assurances that this failure is not repeated in this case and that I have learnt some valuable lessons, I thought it was odd that we spent most of our meeting discussing the past, rather than the opportunity presented for the future. In the name of fairness, I must affirm that I have started to see less and less of such investors. In fact all of the investors I met in 2016 have never asked me or even mentioned my failed ex-company. So this is a good sign that the London tech scene, at least, is becoming more forward looking.
Nonetheless, failure is a hard pill to swallow, but it is an important experience. I would go as far as saying that you must embrace failure. You cannot call yourself an experienced entrepreneur if you have never screwed up. It’s like saying that a boxer is a great boxer because he/she has never been punched. I would argue that this boxer has never been in a good fight.
Now hold on to your horses!
I’m not suggesting that you should go out there and intentionally fail. What I am saying is that you must never be afraid to try. Most likely, you will fail, or you may have to completely change your business model or even change your product entirely. In the tech world, we call this pivoting. There is no shame in trying and failing, or in changing your plans completely, or in changing your brand or image…etc. This is called progress.
I speak to many tech startup owners almost every day and I’m surprised how many of them tell me repeatedly that they would never abandon their businesses or consider pivoting. But I don’t fully disagree with them. If anything, I actually applaud them because it means that they are committing their lives to serving their markets and customers for the long term. At the end of the day, being an entrepreneur is a mission of solving a problem that can help many people. It is, indeed, a big commitment. Though, not wanting to change or to abandon their original idea, or even to shut down their startups entirely, could also mean that they just don’t want to let go, or can’t let go (which can be dangerous if a company is failing). During the 2008 financial crash, I lost my first venture and it was difficult. Seeing your hard work crumbling around you is tough, especially in a freaky environment that has nothing to do with your business, yet it is causing the death of your company. But it was an experience through which I’ve learnt so much. Not just about dealing with a dying business, or about how the world looks in a big financial calamity that comes once in a life time, but also about myself as a person and a maturing entrepreneur. I will write about this separately in the near future.
So, start trying, and keep on trying. If you fail, well, at least you tried and learnt something new. Then you can try more and fail more. It’s an adventure and you must deal with all of the obstacles and challenges that will definitely punch you very hard in the face and will knock you out. If you can say “bring it on” and are not scared of failing, then you have just reached step four toward becoming an entrepreneur.
5- Getting funded is more of a dream than an expectation
Since we are still recovering from the Olympics fever, I will use the notion of winning medals to describe what it takes to secure investment funds for your new startup. At the beginning, you have no choice but to fund yourself by yourself — may be with the help from family and friends. Then, you will have to work so hard to build your capabilities in order to be able to beat your rivals at achieving your dream of winning the gold medal. And it’s a very close competition because your rivals are as good as you are, if not better. Luck also plays a huge role here. This is, I’m afraid, the true picture of raising any funding for your new venture, not just investment funds.
You have probably read through endless announcements on Crunchable (amongst others) about endless numbers of tech companies securing investment funds almost every day. In most cases, you have probably never heard of any of these companies, yet they have raised several millions of dollars through individual rounds. And, to add to the hype, you probably read about hundreds of startups successfully securing funds on crowdfunding platforms, like Crowdcube and Kickstarter. So, you won’t be blamed for thinking that it look as if it is normal and somewhat straight forward to raise any amount of cash from investors to fund your new baby.
Well, it’s not.
The key point to remember is that most investors, including large institutional venture capital firms (VCs), tend to invest in a handful of companies every year. From the investors I’ve met, including individual business angels, fund management companies, angel networks and larger VCs, they tend to fund an average of twelve startups per year.
In the UK alone, over 500k new companies were incorporated in 2015. Now let’s do a simple calculation. Let’s say the 100+ investors that I’ve met so far, each invested on 12 companies per year. Then, hypothetically speaking, in 2015, only 1,200 companies out of the 500k new companies were funded by these investors. Note: I haven’t accounted for existing and more established companies in this non-scientific stat. Many investors, in fact, don’t even invest in companies younger than 5 years old. So I would say the reality is that a much smaller figure than 1,200 startups were funded in 2015 out of the 500k new startups. Much smaller!
Here is a real example. In 2014, Scicasts secured its first seed investment fund of £150k, which is not a huge amount and, in fact, it is seen as the easiest fund to raise for UK startups that are under 3 years old. This is thanks to the UK government’s Seed Enterprise Investment Scheme (SEIS), which provides large tax incentives to investors who invest in seed-level startups. Even then, our investors only funded 16 out of 600 companies that approached them in the 24 months leading to 2014. One of these companies was Scicasts. And believe me, I had to work hard and contact and pitch to MANY investors for this “easy” investment opportunity. It is anything but easy.
The fact is this... Investors want to see a functioning company, with a functioning product or service. But above all, they want to see a company that shows a good traction of users and/or customers. Whether you are a seed level startup or an established big business, the same rules apply. Hence, in order for you to reach to this level at such an early stage, you have to use your own funds.
You might be asking me: “Tim, what about banks?”
Let’s move on swiftly, don’t waste your time!
So you are now at the stage where you are prepared, you have a business, with a product (probably crappy but functional, which is fine), and you are now ready to compete against other great startups to get investor interests. Effectively, every investor is like a competition within your sector’s massive league. So you will have to pitch to endless numbers of investors until you “win” your investment against other startups. If you continue not winning and not gaining any traction from investors, then this means that there is something wrong and you will have to look back at your business or product and decide whether or not your efforts can go any further. Just like an athlete has to decide if he or she can carry on training for a few more years following consistent losses in various competitions. As I mentioned earlier, it is tough to let go, but this is one of the key moments where you will have to make this decision following consistent losses of getting any funding from anywhere.
But I must emphasise that securing investments does not automatically mean that your company will become successful. It will simply mean that you can improve your product and grow your team, and hopefully grow your sales (if relevant). And the opposite is true, the fact that your company has not secured an investment, it does not mean that your business is doomed. It could mean that you have probably pitched to the wrong investors. Investors are humans and, therefore, have preferences too. So if you are running a fishing business and pitch to an investor who has never been involved in the fishing industry, then most likely your company will not get any investment in this case.
Yes, this is yet more pile of stuff to add to your existing workload. Are you still thinking about your social life and freedom? If not, and if you feel that you can take on the investment funding world and deal with frustrations of not being able to get investor interests, then you should strongly consider becoming an entrepreneur now. Why? Because you’ve just reached the fifth step toward becoming an entrepreneur.
One more point!
You may think that I’m trying to put you off. Far from it. My aim here is to paint the real picture of what it takes to be an entrepreneur. Note that I have not mentioned anything about your education, or work experience, or being some kind of a genius in order to be an entrepreneur (though these elements can help). We all have creative tendencies and we’ve all been through an “aha” moment. What it really takes to be an entrepreneur is that sense of mission to make a difference to many thousands or even millions of people. It is a passion and a dream, which also involves teaching yourself new skills that you probably never had to learn before. It also involves reading unlimited numbers of books, magazines, journals and blogs (Yep! more to add to your workload). Here is a great and detailed article from the NY Times discussing this very point for new CEOs.
If I had to choose, would I do all of this again and go through the pain, sleepless nights, and life changing challenges, not to mention stress, stress, stress and more stress? Hell Yeah! Though, it would’ve been nice if I did not go through the 2008 recession. But you know what? I’m proud that I have been through it since I can say that I have died and came alive again during the worst, freaked-out financial crisis the world has seen since the 1930’s. And I will be sharing this with you at a later date so that you can avoid some of the mistakes that we have all made at the time.
Good luck with your new life as an entrepreneur.
Don’t forget to respond below with your comments or questions. And, of course, feel free to suggest more points to what I’ve highlighted above.