david hieatt

How to raise money for your idea?

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I get asked this a lot. But I’ll be honest with you, I am no expert. I have had to learn a lot of this stuff the hard way. Mistakes are good teachers, if you don’t repeat them. I share this in the hope of it being of some use.

1, The shares you sell at the beginning will cost you the most.

The shares you sell at the beginning are the ones you get the least amount of money for, and yet cost you the most in terms of the percentage of equity you have to give away. You can understand why: You have no sales, no track record, but lots of unproven assumptions. You are a risky bet. Once you have gotten some sales, proved your idea can work in the real world, you are in a much better position to raise money. And, get a better deal.

2, How to build something without funding?

Well, you could use your savings. There’s your credit card. There’s your mum and dad. There are your friends.  There are even your suppliers. (Arrange 90 days credit with them and then do your best to sell your goods within 30 days).

Another way to get your company going is to keep your job, and start it part-time. This allows it time to find its feet. It keeps your overheads low while you get sales. As Wu Tang say: Sales is power.

This way of starting is called Bootstrapping. It’s the approach to starting your company with the minimum amount of investment. It is helpful in the early days to find out if there is anything in the idea, to prove that it will sell, to have your customer give feedback so you can iterate quickly.

The problem with failure is it can take a long time and be costly. This technique can help you to fail fast, and fail cheaply. So you can move on to your next, and better, idea.

3, A track record helps.

Raising money is helped if you have some success elsewhere. Especially when it is in a related field. You will be able negotiate a better deal than a total raw start-up. People back people who know how to succeed.

4, Being first helps.

If you have a digital idea that hasn’t been done before, it maybe better to raise as much money as you can. And launch fast. That way, you grab the audience before a rival does. That is valid too.

This is the counterpoint to this view and it is worth a read for sure: http://theleanstartup.com/

Y Combinator is teaching startups the value of their ideas. And that is a good thing. Don’t sell yourself cheap. It is also teaching them the importance of speed in a digital world.

5, What if you have lots of people wanting to invest.

It can happen. Maybe you have had some good press, maybe your circle that hang out in are very connected, maybe the idea has just captured peoples imagination, but for whatever reason, you have several people who want to invest. This is a good thing.

You will now be able to negotiate better terms as a result. So the normal set of valuation rules fly out of the window. Also, you want your investors to be able to give you more than just money. Who will be a great mentor? Pearls of wisdom are hard to come by.

6, Split the Share types.

One thing to consider when you are selling shares is to try and split them between voting and non-voting. So that way you get some capital, but no matter what, you keep control. Nike did it this way. And Phil Knight was an accountant.

7, Build a team.

Ideas are important. But it will be the team who makes that idea happen. People invest in people, even more than they invest in ideas. A great idea with an average team will not succeed. Find people who are as good as you, but with a different skill set, and make them a co-founder.

8, Do the numbers add up?

Are the margins good or great? As you scale the business, do your costs scale too? Are you selling gold for silver prices? What bit of the business model are you changing to allow you to offer something ‘better’, ‘cheaper’ or ‘faster’ to your customer?

As Warren Buffett says: When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

Just make sure in the cold light of day that the economics are good. Don’t kid yourself.

9, Show growth.

Investors like to see that. They like things that can scale.

10, Can you protect your idea?

Trademarks? Patents? Secret Formulas? Copyrights? How can you put a moat around your idea? It can be just that you were first, or your idea is written in high-level code, which means you can move fast. Investors like something other people can’t copy, or can’t do it as well as you currently are.

11, Nobody likes doing business plans. But, you have to show that you have done the thinking.

Doing business plans is a pain. But not as painful as going out of business because you didn’t think it through.

12, Don’t ask people for money.

There are lots of rules about asking people for money for startups. The FCA is very particular about this. If you are raising fairly big money, you will need to be FCA registered. That can cost you a good deal of money. You will also have to ask people if they are high net worth investors, and they will have to put that in writing before you can approach them about it. You will also have to declare all the problems of the business. Tell them all the ugly stuff. Hide nothing from them. And be very measured about the upside.

In a perfect world, potential investors will approach you, and that is different. Then you can talk to them.

13, What are you changing?

The best businesses change something. What are you changing? Customers like to be part of a company that changes something, and investors like to invest in new business models.

My investment in The 25 Mile as an example.

http://www.the25mile.com/

 1, The shares you sell at the beginning will cost you the most.

The 25 Mile, which sources its main ingredients from a 25 Mile radius, is a Gastro Pub that I invested in. I had just sold my company and had a year before I could start my jeans company. I had some time on my hands.

I did it with a partner, but alas the partnership didn’t work out. So instead of me being a sleeping partner, I found myself being the boss of something I knew very little about.

I had a choice to either just walk away, or try and make it work. But I believed in the idea, in our town and the team, who work so darn hard. They have my full respect. So walking away, well, that wasn’t an option.

All the investment money came from the founding Partners. So that was good. The first thing I did was to get Scott Davis on board. Scott is one of Britain’s unsung hero’s. He has worked under Gordon Ramsey, Marco Pierre White and worked at the amazing Nobu Japanese restaurant. And I just told him this is your canvas, go paint.

http://www.dolectures.com/lectures/the-dark-art-of-running-a-small-gourmet-food-company-in-a-small-country-called-wales/

We gave him part of the company. For me, he was the talent, and without him, we didn’t have anything. Once the original founding partners are bought out, which they have agreed to, Scott will become an equal partner.

If the talent, and the driving force of the company don’t have ownership, the chances of success are much slimmer.

2, How to build something without funding?

The 25 Mile was ‘Bootstrapped’ from day one. And there have been days, weeks, and even months when you think is this ever going to work. But against all the odds, The 25 Mile is still here. The team has never been stronger. And the business, and its reputation, is growing.

The thing I knew before I got involved in this business, I believe in even more now: If you build a team, you can build a business. If you trust the team, they will trust you. If you gather a team around something worth fighting for, they will fight till the end for it.

3, A track record helps.

I have never done a food business before. But, that is why Scott Davis is the driving force of it. And that is why he was given part of the company.

Ultimately, investors will be investing in his vision, his skill, and his ability to replicate simple.

4, Being first helps.

It does.And we are the first of our kind to set up our business with such a defined aim. We called it ‘The 25 Mile’ because it would source its main ingredients from a 25 Mile radius.

It would not be an easy thing to do. But restrictions can be a powerful thing. (It hasn’t hurt Twitter: 140 characters was a restriction forced on it because that was how many characters a text message could send).

Our restriction was we wanted to use the best ingredients on our doorstep. We wanted to make a stand for great local food.

The good thing is more and more people want to know where their food comes from, they love food that is fresh and that it supports a community of growers.

5, What if you have lots of people wanting to invest.

We have tried our best to stay under the radar while we get good at being The 25 Mile. So, not many people know that it exists, so this hasn’t been an issue for us.

6, Split the Share types.

We didn’t do this. We should have. And, once the original partners are bought out, we will.

7, Build a team.

In the early days, lots of people were leaving. And I didn’t get it. But the problem was that we hadn’t built a team. The best teams are built around two things: An idea that matters to the team; and trust.

The good thing is Scott has built a great young team who trust him. They believe in each other, in the idea, and in themselves. And the team has never been stronger, and happier, than it is right now. Kudos to Scott, for that.

8, Do the numbers add up?

It’s a tough sector. But the food side of the pub business is growing. And the ‘affordable premium’ side of the business is growing very nicely. By ‘affordable premium’ I mean doing simple but well. And pricing it so it doesn’t become a place when you only go to for special occasions.

For the 25 Mile, doing more of them will make the numbers add up. The management costs will be spread across multiple locations. And at that point it becomes a great little business.

9, Show growth.

The business grew last year by 20%. And, the team are forecasting, it will grow another 20% this year. And, it will turn its first profit.

So can we scale it? Yes, I think we can. We took a pub that was empty for 3 years, and it has become alive again. There are lots of empty pubs that we could bring back to life.

I can see them in locations up and down the west coast of Wales. But right now, the team are just focused on getting better at being The 25 Mile.

So it has potential for growth. That begs the question, where do we go from here? Well, we have hired a full-time manager.  And we are now telling the world we exist. Our new website went up last month. Our new blog launches this month too. And I am sure the day will come when one day the team will have to decide if they want to go and do more of them. But the team know, if we can make it in our small, humble town, then it could do very well in much bigger towns.

If we do more then it will be their decision, and not mine. The team must want to go and do it.

10, Can you protect your idea?

We have trademarked the name, of course. But the best protection will be our consistency of great local and simple food. Consistency comes from an understanding of our way of keeping things as simple and as fresh as they possibly can be.

The 25 Mile also wants to become part of the community. So we are open 7 days a week because the growers are out there, come rain or shine, 7 days a week. And we want our customers to use us to push their cause forward. So once a month, we are doing a ‘cause night’ where people can bring people to come and eat with us, and 25% of their food bill goes to the cause their raising money for.

Also, our long-term aim is to have a microbrewery with each pub, brewing its own ale. That would be cool. It also makes it costly to copy. That is good, too.

11, Nobody likes doing business plans. But, you have to show that you have done the thinking.

There was no business plan for The 25 Mile. And much of the stress of the startup was because of that. It was a mistake. Every other business I have done, we have always done a business plan. I don’t like them. But I like failing even less.

12, Don’t ask people for money.

We said to ourselves it would take 3 years to get good at being The 25 Mile. So we had a strategy of not telling anyone about it. Not a single press release has been written in 3 years. I have avoided getting any publicity, we even had a website for 2 years that never changed. I just think sometimes, the team’s best use of their time is just to get good at what they’re doing.

We have talked to breweries about the idea, we even had a whisky company interested in what we are doing, but we have not gone out and talked to anyone.

13, What are you changing?

Local food matters. Local isn’t a trend or a fashion. It is something that will always be important. Because food is important. And knowing where it comes from is important too. And keeping growers growing is what we are fighting for.

The first thing I did was to tell the team why what they were doing was important: We believe in local food and the hard working growers; and we believe in them as a team, in their work ethic, and their talent. And we believe in our town, and some of those great ingredients should stay here.

The most passionate teams gather around a cause that is important to them. That is why David can beat Goliath. It just matters to David more.

The 25 Mile is here to fight for great local food. We called it The 25 Mile because it would source its main ingredients from a 25 Mile radius. We made it hard for ourselves to succeed. But restrictions can be a powerful thing.

It hasn’t hurt Twitter: 140 characters was a restriction forced on it because that was how many characters a text message could be. 
Our restriction was a 25 mile radius. As the crow flies.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Most people are good. The smart companies understand that.

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The other day I had some wood delivered. I asked the guy how he’d got into the wood business. He told me he burnt a lot of wood for his own use, and so was forever ordering wood. He would insist on kiln-dried wood, but that wasn’t always what was delivered. In the end he got fed up with being letdown. He figured there must be a gap in the market for a wood company that didn’t lie.

Oh boy, his niche would be honesty.

That got me thinking about how important trust is. And also, how rare it is. I once left £50 at the hole in the wall. I was daydreaming. I told the bank manager and he put the £50 back into my bank account as a gesture of goodwill. That was 20 years ago. I am still with the same bank.

Recently, I stayed at a great hotel resort in San Francisco. I had ordered a taxi but after 15 minutes it still hadn’t turned up. I told the concierge. She was super annoyed with the taxi company. So she said she'd drive us all into town herself. As we got outside, we could see the taxi heading up the driveway towards us. She said they didn’t deserve our business, and insisted on driving us herself. On the way she told me that the resort had been voted in the top ten resorts in USA, but she didn’t know why. I knew why, and she was driving me into town.

The companies who are crazy good stand out because they are rare.

Conversely I bought a large-scale Canon printer from one of their reseller agents. From the first week, it never quite worked properly. It had a problem with yellow, which is a bit of a problem if you are printer. The repairman kept getting sent out, and each time the problem never seemed to go away. We spent more money on fixing the printer than the printer cost to buy. It still doesn’t work. The agent no longer returns our calls.

Then this weekend I walked into the Bose store. My noise cancelling headphones had stopped working in one ear. The staff told me if it wasn’t under warranty I’d have to pay £100 to get them working again. Like the printer, I would have reward them with more money for their product failure. Sorry Bose, I know your engineers are super clever but premium headphones should work for more than 2 years.

For me, I don’t understand bad service. Why wouldn’t you be on the customer’s side? Why would you go to all that trouble to get a customer just to let them walk away? Why would you want a customer just once and not for a lifetime? 99% of customers are good people. Yet, all the rules in place are to protect companies from the 1% who aren’t so good.

The best companies have figured that one at. They have realised most people are good. They give them the benefit of the doubt. Smart companies trust.

Why purpose matters? And why I am writing a book on it?

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Do Purpose - Why brands with a purpose do better and matter more.

By me.

I have never had a strong desire to write a book. But that said I have spent the last decade writing about brands, business and things that have inspired me. The thing that all these businesses seemed to have in common was their desire to change something. They had a reason to make it happen. Something in their belly was driving them forward.

I have always been curious about why some people are so driven. I still don't know the answer. But what I am clear about is that these people know why they are doing it. And their purpose keeps them pushing, stops them from quiting and in the end, makes us fall in love with what they are changing. Because it is the change we want to see in the world too.

For me, purpose driven companies are the most interesting ones on the planet. So, I have written a book about it. But, I guess I have been writing it for the last 10 years without realising it.

Miranda from Do Book Co persuaded me people might be interested in reading it. (Time will tell if she is right on that one.) She has cleverly teamed up with the pioneers at Unbound, which I think is appropriate as they are in business to change the publishing industry. 

My ambition for the book is that it becomes one that you keep refering back to. I do this with Paul Arden's 'It's not how good you are, it's how good you want to be'. And Yvon Chouirnard's 'Let my people go surfing'. If I get anywhere close to those two, I will be more than happy.

Here is a page from the chapter on Time.

Your time is limited. Remember that.

Each day you’re given 86,400 seconds from the ‘Time Bank’. Everyone is given the same. There are no exceptions. Once you make your withdrawal, you’re free to spend it as you want. The ‘Time Bank’ won’t tell you how to spend it. Time poorly spent will not replaced with more time. Time doesn’t do refunds. Time is your biggest gift. Indeed, it is more valuable than money as you can make more money, but not more time. But there is one simple truth: Your time is limited. And one day you will go to the bank and it won’t have anymore for you. And it will be at the exact moment, that you will know the answer to this simple question: Did I use my time well? Did I do what mattered most to me? Did I find my love? And did I pursue it like a wild hungry dog chasing a three legged rabbit?

You can click on the link for Unbound here, and make a pledge to get a special edition of the book. 

 

Wanted: Driver

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Right now, you are looking for the project that will define you.

You want to do your life’s work. But you haven’t found a place that will let you.

And the clock is ticking.And you hear every tick.

You want to put all that experience learnt from over 10 years working in front of house and being restaurant manager in the best places in the world to good use.

You probably have a young family by now and returning home to Wales sure feels like the right thing to do. But you want a legacy project. In fact, the way you are wired, you need a legacy project. Well, we would love to talk to you.

You see, two years ago we started The 25 Mile. We took over a pub in the centre of our town in Cardigan, on the far West of Wales, and re-opened it.

Our idea was to source the main ingredients from a 25 Mile radius. We wanted to show the world that local is the future.

The first year, oh boy, the learning curve was almost vertical. And, trust me, there were times when we wondered what on earth we were doing. We knew our town had a small catchment area of just 4,000 people, of which we figured around 400 people would possibly be interested in dining with us. And that would make it hard for us to survive as a business. We knew that. So we went into it with our eyes wide open. But, what our town lacked in numbers it made up for in having some of the best ingredients in the world. The dolphins, as good as the views are, come here for the fish.

Another one of those key ingredients was persuading Scott Davis to join the team and become a partner in the business. He had learnt from some of the best Chefs in the world: Gordon Ramsey, Marco Pierre White and all the chefs at the legendry Japanese Restaurant Nobu. But for Scott, like the salmon from our rivers, it was time to return home so he could practice what he had learnt.

And the business is beginning to find its feet. It has grown 20% this year. We are forecasting it will grow another 20% next year. And yet, we have not written a single press release. Nor placed a single advert. Rather than spend time hyping ourselves, we spent time on getting good at what we do.

Over the last two years we have built an amazingly talented young team. The growers have learnt that we will support them come rain or shine. And like them, we are growing. And our customers are learning that they can rely on us to have a great time in a relaxed environment. Consistently.

So right now, we are thinking about the future. We always knew if we could make it in our town, we could make it in bigger towns too. And we could take The 25 Mile idea to towns up and down the West Coast of Wales. And then Devon and Cornwall. And, one day, over to the West Coast of Ireland.

We want to celebrate local, to support growers and to show that the providence of food does matter to an ever-growing band of customers. And we want to show to everyone that all these empty town pubs can thrive again and become an important part of the community.

At some point we will have to go and talk to potential investors about taking this idea to other towns. In our favour, we have a strong idea with a narrow focus, we have the start of a powerful brand, we have an international book publisher already interested in doing The 25 Mile book, but, more importantly, we have shown that it can work in a small town like ours.

One of the most important questions a potential investor will ask of us is 'who is on the team?' We have a strong team for sure, but we are one person short on the team. And that person is you.

I have no doubt we can go and raise money for The 25 Mile Group. But I am also pretty certain we will not raise a penny without you on the team. As you already know, it is not easy to take an idea and roll it out. The attention to detail is insane, building teams is a dark art, and managing a business that will be growing fast takes a steady pair of hands.

So if you are interesting in driving this business forward, if you care about the food that your customers eat, if you believe in the growers, if you believe in these small towns, and if you believe in the power of small communities to come together over food, we’d love to talk to you.

http://principles.the25mile.com/

email: davidhieatt@googlemail.com

 

 

 

 

 

 

 

 

 

 

 

I am not good at Email. But I am good at getting things done.

People who know me, know I don’t have much time for Email.I don’t reply to all of my Emails. And the ones I do reply to are as pithy as I can make them.In my book, one word replies are not rude, but are saving both the reader and the writer time.

I view Email as distraction from making things happen. I view getting things done as more important than having an empty in-box. I have bought all the apps to help me cope with Email. But they don’t work for me. It’s not them. It’s me.

“You can do anything, but not everything.”

I guess the point I am making is that Email is very efficient at using up a great deal of our time. It’s a super addictive distraction device that will stop us from getting stuff done if we allow it to.

 

 

 

 

 

 

 

 

 

 

 

 

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In a busy world, be human.

Time is limited. And therefore, expensive.

So companies seek to take time out of each process to save money.

That’s why we when we phone companies up we can’t speak to humans anymore.

Instead we have to Press 1 for a suckier service than before.

So we all get it. We understand why they have to do it, but none of us really like it. No one thinks it is better. It’s just more efficient.

When we try to find ‘Love’, we don’t seek efficiency. When we play some music, we don’t sing to get to the end of the song. We don’t go to bed at night and dream about one day finding efficiency.

Humans are complex critters. But also incredibly simple too: Humans like speaking to humans. We just want to speak to someone who cares. Generally speaking, someone with a pulse helps this process along.

And who’d of thought this? Giving a shit can be great for business.

Zappos has built an entire business around caring about the customer. They even spend weeks training people, and then halfway through the training, they offer people money to leave. They want people who care to stay, and people who don’t care to leave.

So if you want to build a great company, make it less efficient.

Hire humans who care about the stuff you care about.

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Dig where you stand.

When you run a small company, next week is always the biggest week.

And next year will always be your most important year.

That tends to breed a culture of not ‘digging where you stand’. Of not focusing on today’s problems, because tomorrow will fix them. It doesn’t.

The reason next year’s product will not be ‘the one’ will be for the same reasons as this year’s isn’t ‘the one’ either. For a product to truly change, you have to first change the culture or the thinking that will produce it.

Part of this is accepting that your current project, product, website, blog, is the one. So commit to it. Iterate like crazy on it. Make this your best work.

You are here. Dig.

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Big companies have forgotten what its like to go to work in its underpants.

A start-up has the odds very much stacked against it.

But at the same time it has such incredible advantages that allow it to overcome them.

Yes, it’s under-funded. It’s almost a rights of passage. Apart from a computer, it has no infrastructure to speak of. No one knows they exist. They have no experience in what they are doing. They have never started something before.

But the things in its favour are enough for it to win.

First, they have a great idea. Sure, big companies have great ideas too, but a Start-Up amplifies the power of a great idea by making it happen fast.

A great idea executed at great speed has the power to disrupt entire industries because it launches the idea first. Being first matters when you are disrupting things. You get the most media coverage, but also you get the most funding and the most time to work on getting it right. You build a customer base quick. And your customers are already giving you feedback to get better.

“Your biggest rival is in his living room coding wearing just his underpants while eating his breakfast”

The speed comes from energy, passion but also being a tiny team. They have no legal department, they have no sales departments, they have no meetings, they have no office politics, they have no history of doing it in the same way, they have no memos, they have no bosses, they have no time for research, they have none of this. And all this is slow stuff.

Small teams make things happen faster. Boom.

 

 

 

 

 

 

 

 

 


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This car is going to run out of petrol. I just don’t know when.

When I worked the markets in the South Wales Valley, I had this amazing old Fiat 128. I loved it. But it had one or two quirks.

The key one was the petrol gauge didn’t work. I didn’t know if it was nearly empty or completely full.

So when I did a market, I was super keen to sell so I would have money to fill the car up full with petrol so I could relax. On days when I didn’t sell, and there was too many of those, I wasn’t sure if I would make it home. I did my fair share of walking home.

"Sales is Power" - Wu Tang

I learnt to drive in that car. And, more importantly, I learnt the importance of selling.

Yup, always be shipping.

 

 

 

Failure to commit is as bad as failure to start.

The single biggest reason most businesses fail is because they never start.

People sit around telling their friends their great idea and don’t ever make it happen. Ideas need someone to make it happen. Ideas need doers not talkers.

Another reason businesses fail is because when they do eventually start, the founders don’t quite believe in the idea. Or one of the partners doesn’t. A lack of belief can be much more damaging than a lack of funding.

In terms of Rugby or Football, this is the equivalent of not fully committing in the tackle. And when you are half-hearted in the tackle, you much more likely to get injured.

Players, who’re saving themselves for the next big game or an important tournament, often end up injured because they held back. Holding back often ends up in tears.

If you're going to try, go all the way. Otherwise, don't even start.

Likewise, ideas need you to commit. They need all your money. They need all your time. They need all your energy. They need all your love.  They need all your belief.

If you are half-hearted about the idea, don’t even start.

 

 

When change comes knocking on the door, will you hear it?

One night last week, there was a knock at the door.

It was a guy delivering Yellow Pages.

He delivered one for us. And one for the next farm, who were out.

I will never use it. I doubt the farm over the road will ever use it either.

Its time has been and gone.

It saw the Internet as a threat and didn’t move fast enough. Instead of cannibalising itself, it let Google do it for them. They kept doing the thing it had always done.

Chains of habit are too light to be felt until they are too heavy to be broken.

And now it has to change when it is at its weakest in terms of its ability to raise money and perhaps more importantly, is it just too late. The transition from paper to digital should have happened at least a decade ago.

The trouble with doing business like you always have done is if your customer is changing faster than you are, you will wake up one morning and they will be gone.

And you won’t have to worry hearing the knock at the door; the door will have gone too.

 

 

 

 

 

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