NewMediaInvestor, 2 June 1999

Ya Gotta Believe

That was the main message given out last Monday, at the Red Herring's Entrepreneur's workshop in London. And given that it was a bank holiday, the fact that over 150 people turned up for the event gives a solid indication of how serious the European market is becoming. This is the first year that Venture Market Europe (Red Herring's European event) has held an entrepreneurs workshop, and according to a spokesperson, they were delighted with the attendance. Not nearly as delighted of course, as those venture capitalists who had dragged themselves out of the sunshine to take part. It was divided into two channels, raising finance and building a business, and in both sections it was standing room only. In 1998, for the first time Europe had more IPOs than the US, at 155 versus 147. On the Neuer Markt alone, there are said to be 7300 companies waiting to be listed over the next 14 months. The message was clear. Although it is getting easier to raise money for new ventures in Europe it is getting progressively harder to attract the right people and grow the business fast and effectively enough. One of the highlights of the workshop was the presentation by Richard Irving of Pond Ventures (a technology start-up fund which launched in the UK last year), on writing a killer business plan. What came across is that the management has to be believable - and that means being able to persuade potential investors, partners and management that the vision to bring the business to fruition is there. Irving pointed out that without belief in the vision, no one else will buy into it. He also gave some good advice on why most business plans suck. In his eyes, venture capitalists are 'mostly nervous optimists', and suggested that entrepreneurs spent more time on risk mitigation in the structure of their plans, or at least be aware of what the competition is! His advice was as follows: create an exciting vision which is emotionally exciting, find a real need, the right market, remember to build a company and not a product, remember that you need to build a team, be honest about your competition (as well as your own strengths and weaknesses), plan how to win, work out how much you are really going to need (so work out what it should cost, as well as what it could cost). In the end, Irving says, the thing to remember is to build your onion. Bizarre as that sounds, it makes a great deal of sense. The different levels that you need to work on to make an effective business plan need to be developed in layers. He also gave some great advice to entrepreneurs, to work hard on both the executive summary and the elevator pitch. What you need to tell your investor, and this is true for venture capital fund raising as well as for those with great ideas for an internal project, is what you're planning to do, what the market is, what you need to do and why you're going to make it big. If you can get that down, it shouldn't prove too difficult to get your plans moved forward. Another thing that Venture Market Europe has shown this year is that the valuations of UK and European startups are growing fast, with a widening body of entrepreneurial talent moving into the market. The Internet market in Europe is going to be huge. Wouldn't you be rather be in on the ground floor, rather than playing catch-up two years from now? These days, you've got a six month window of opportunity for a great idea, and probably only three months before somebody else starts doing it. When one of Yahoo!'s early investors was asked what Yahoo had that made it a worthwhile investment, he said "three months". That three month lead four years ago has translated into global market leadership. And that is worth remembering in the European context.