Creationism: De-risking early stage investment
“The grass is always greener…”, there are many catchphrases that describe life and business, but they always seem to be in the future tense and suggest some sort of heroic journey.
In our experience, uncovering the next big thing from an investment perspective is more about hard work and creating opportunities rather than hoping they will come. Identifying opportunities with outstanding potential is not your biggest obstacle—they often simply stand out. The challenge comes in executing the opportunities to deliver investor value.
Too often companies celebrate raising money like this is a milestone—look at all the crowd funding companies and the sense that raising funds for a business is a reason to celebrate! Can you remember the last time you saw real success publicised when a private company sold out and shareholders made loads of money? Society is not recognising entrepreneurship in the right way—we need to be celebrating those that have actually delivered investor returns rather than those who have raised money.
Engineering Business Success
This really leads us to a new wave of thinking in the world of early stage investment and corporate finance. Business success in our view can be engineered. Increasingly companies are being created and engineered carefully at each stage rather than relying on the vision and execution capabilities of an entrepreneur.
The development of a business is a team effort and like most teams the players have different skillsets which are called upon at different times. A team is not built around a captain, in fact the captain often ascends from watching how the team performs. We call this approach creationism—where we work with companies to ensure they have the right people for the right jobs at the right time—to maximise their potential and improve execution. If you are building a digital business your first team member needs to be someone who can actually build the technology. Once built it will require new team members to take it to market before the captain brings the skills and experience to really get the dial moving. In fact, early stages investors should act more like a recruitment agency than simply passive investors and advisors.
The Hands-On Approach
The key is to work with entrepreneurs in a more active manner to map out the execution timeline and resources needed to succeed. Early stage business funding does not need to be fraught with risk and riddled with failure if the investors and the investment channels or platforms introduce more rigour into the management of the businesses. Ensure prior to investment that a road map has been set out to achieve success with all the relevant resources and people mapped out.
At Angel Business Club, we have put in place a rigorous process of business selection, with a focus on proven businesses (not start ups) with three clear and distinct frontiers, 1) Market entry and protection; 2) innovation and growth; and 3) total industry disruption.
Lifesafe, an Angel Business Club investment, is a great illustration of how creationism can be effective.
Shaping The Future
Lifesafe invented the world’s first universal fire extinguisher. The product has a unique patent pending fluid that puts out all types of fire. They are faster, safer, and use less fluid, while also being environmentally friendly. It is a business which we hope will transform how we all tackle small fires. It is a business that has, and will, save many lives.
The genesis of LifeSafe was all in the chemistry. The business was developed with the fluid as its focus. The foundations were formed in science and with experts in chemistry. When the fluid worked, the Company recruited fire engineers to secure the relevant EU industry accreditations. This lead to LifeSafe bringing in marketing, supply chain, and procurement expertise to develop the products and branding, secure exclusivity for barriers to market, and prepare the company to deliver to retail production standards.
Finally, they went looking for a chief executive who had the experience to take this perfectly formed business to market. They have just recruited a CEO who has extensive retail experience and sector experience, having taken a fire related consumer product to more than 70 per cent market share in UK retail in a previous role.
“When Lifesafe was first presented to us at the Angel Business Club, it stood out immediately, a game changing product with an addressable global market. The risk was always in execution as the product speaks for itself. By following the creationist route, we believe our investment has been more focussed—spending money on the right things at the right time— and less pressurised, as the journey was mapped out in stages, ultimately making it less stressful as both the business and investors were fully aligned.”
Choosing the right people at the right time is the key differentiator. After all, companies are made of people.