Why did you become an Entrepreneur?

What Made You Decide to start your own Small Business?

Why did YOU take the plunge?
Why did YOU take the plunge?

*This is a guest blog

I often get asked why I became an entrepreneur? Why did I start my own company? I could answer that I grew up in an entrepreneurial home, with a father who ran his own business for years.  I could answer, that the change agent  in me did not like working for large corporations and instead wanted to build my own business and make things happen. However, neither of these reflect reality. My answer, much to the surprise of most, is  that I became an entrepreneur out of necessity.

Throughout my professional career, I found entrepreneurship to be the one constant that I could keep coming back to.

I first started working for myself during graduate school as a way to make ends meet. I had worked for nearly 3 years in industry doing market research, proposal writing, financial analysis and marketing and sales. I brought these varied skills to entrepreneurs and started working with green energy companies at the time helping them re-write and re-design marketing materials.  After that, I kept doing the occasional business or marketing plan

“Throughout my life, I always found entrepreneurship to be the one constant I could keep coming back to”

I was home on maternity leave with my daughter and throughout this, worked on several projects to keep me busy. When my daughter was 6 months old I found out I was pregnant again. This barred any return to work.  Within another month, my husband found out that he was losing his job.  After the initial shock wore off, we began to think how we were going to manage.

Being the industrious type, I immediately began to seek out projects to work on to keep myself busy.  I tried different types of outsourcing and contracting, but time was limited with two kids under 18 months. I found quite a bit of success in writing business plans. Part, education, part experience, and part intuition I could relate to the entrepreneurs I met. I could understand their pain, as I had seen it before in my father and his colleagues understood, what I like to call “the entrepreneur crazy”, fever and passion all in one that these entrepreneurs had for their businesses. I was inspired by their energy and dedication and genuinely loved working with them.

At the time, I decided to return to school to improve my financial analysis skills. I pursued a designation in  accounting, a designation that focuses on strategy. I returned to work for 18 months as a requirement of the designation, but hated every position I was in.  After having worked for myself, I had a difficult time working for anyone else. Perhaps it was a distaste of authority, or as I like to call it of the “inefficiency” of large organizations, but I was not a happy camper during these times.

At home, my children were suffering too. They had wonderful caregivers, but they were not mom. I was seeing changes in their behaviour that I did not like. These combined with my own unhappiness, made for a very miserable home life for my poor husband. Night after night of miserable conversations, my husband just said, why don’t you quit.  While I was working for others I had continued working on several large consulting projects. It was in these projects that I found my passion again.  I took his advice to heart and took the leap.

That was four years ago.  Since then I have worked with hundreds of entrepreneurs, helping them to define their businesses and their dreams.  There is no going back for me now.  This is what I love to do, and want to do for the rest of my life.

What is your reason? What is your drive and motivation for working on your own? Why do you want to leave it all to begin a consulting career?  What will your motivation or dream be?  Perhaps like most of us, the decision is not a grand vision or altruistic social purpose but out of necessity, out of life change and a need to learn to fend for oursel

The Geography of Funding Inequality

Around the country, incubators are popping up. Tech incubators, health incubators, manufacturing incubators. Venture capitalists continue to create to new opportunities to attract the next big tech company and angel investors sit poised, ready to be mentors and investors to new entrepreneurs.

Every start-up at some point in their existence, considers chasing venture capital. The funding may be a life-line to emerging companies, who have been boot-strapping to just get by. Location plays an irrefutable role in the ability of these firms to get funding. Location determines both the likelihood and the amount that start ups are likely to receive. Consider that start-ups in Vancouver receive typically receive 80% less funding than start-ups in silicon Valley?

Where is a Firm Most Likely to succeed?

Several studies have examined the likelihood of venture capital success. In a 2009 study in the Harvard Review by Chen, et al, and another in 2010 by Josh Lerner, found that start-ups who received funding that were OUTSIDE of the geography of their venture capitalists, significantly outperformed, those closer to the VC’s office.

This posits an interesting phenomenon, why is that investors continue to be scared of secondary markets? Start-ups are naturally attracted to cities where VC’s exist. VC’s often set higher hurdle rates for firms that are outside of their area due to increased monitoring costs for items such as travel time. Do those firms, because of their higher hurdle rates, outperform start-ups in NY, Silicon Valley and Boston? Or, to actually attract VC attention, are these firms better to start with?

How does this affect firms seeking VC funding?
Is it better for firms who are seeking VC funding to pack up and head to a larger tech center?
The  propensity of these firms receiving funding would increase. What does this mean for firms located in smaller cities? Should local governments invest more in encouraging more VC’s and investors in an area?

We will examine these topics in the coming weeks and provide insight and recommendations for firms looking for VC investment.

The Value of Incubators

What is the Value-add of incubators?

Over the last decade, incubators have been popping up all over the country. There are economic development incubators, venture capital incubators and industry specific. On the tech side, Accelerators are the newest label to be put onto incubators. Despite all of this growth, one question that seldom appears to emerge, is “What value does your incubator add”?

What are you incubating?
What are you incubating?

The concept of “value added” is one that rarely emerges in the ever changing world of technology. Value added is no longer “trending” in this world of “build it and they will come”, yet the concept of value add is one that all companies, regardless of industry, company age or experience need to maintain to ensure their long-term success.

Value add is simple, it is the value that you create for your users, your customers and market. It is what makes you different and special in a world filled with competition. It is the service you provide, that has a real, tangible outcome.

In the case of incubators, what is the value add? Most would say for technology incubators, it is the networks, the social connections, the ability to facilitate the flow of capital and investment to young entrepreneurs to commercialize their products/services. Every VC is seeking the next dropbox or Facebook. The job of incubators and accelerators is to function as the intermediaries (middlemen) of old, and connect these two resources.

3 Key Differences

1. While the connection to capital, is most certainly an important value added service, in other circles-mainly those crazy socialist Europeans (note the sarcasm here) are more concerned with a firms longevity rather than its immediate bottomline. The reasons are both social and historical, but it is sufficient to note that Europeans tend to be less concerned with concepts such as quarterly returns, and more concerned with yearly, and multi-year returns. They pioneered concepts of “patient capital” and social innovation. Where North American incubators are connecting individuals to capital, European are offering business support services-Entrepreneurship training, business administration support & yes, financing.

2. Europeans also tend to be more invested in the “entrepreneur” rather than the idea. Rather, than focusing on finding the next facebook, they seek to find the next Mark Zuckerburg. What an original concept, invest in people and the results will come.

3. Finally, more European incubators then tend to invest for longer, in these companies (3-5 years) to get the returns they seek. They are not so much concerned with getting the current cohort out the door, and finding the next batch. The long-term investment is to ensure the long-term success of the company, and the people who work for it.

What differences do these entrepreneurial models create in the end company? What metrics should be used to evaluate incubators? MARS recently released a report calling for an IMPACT metrics for measuring incubator success. The time has come to measure and demand outcomes. Standards need to be created for education, program and service offering and not just simply seeking the next high tech dollar.

Innovation and the Aging Population

There is a lot written these days about innovation, competitiveness and intellectual capital. I hear the banter of politicians, the monologues from leading Venture Capitalists and Investment firms, and I sit back and think about how they have it all wrong.

Our society is aging. David Foot in his ground-breaking work, “Boom, Bust and Echo” discusses the impact of the aging population on everything from Baseball to Housing Markets. As people age, we generally become more conservative. Be honest with yourself, do you find yourself thinking, “how can kids do that”, or even worse looking at your own kids and forgetting what it was like to be that age?

As the whole of society begins to turn grey, we will see a fundamental shift in attitudes, work style and social values. While these changes are not bad in themselves, they will begin to shift Canada from a competitive and innovative nation, to one that lags in industrial and technological competitiveness. The beginnings of these shifts are already occurring. Report after report documenting lagging Canadian productivity and economic slumps hits the airwaves every few weeks. Taken individually, these may represent nothing more that an slow economy. However, our economy has been slow for nearly 5 years. The “Boom” years are gone.

The graying of our population is not a bad think in itself. There is much wisdom that can be reaped from the experienced to new firms starting out. Repeatedly, our politicians push money into grants, into mega-projects, and large industrial complexes, in hopes of getting a sound-byte with their name on it, when really what we need are small focused, incubators, mentorship programs, and training platforms to transform the tacit knowledge that exists in our aging population and extend it to our youth.i

Youth also must understand that they are not “unique snowflakes” (as one friend often refers to the Y-Generation) and that the struggles that they as new entrepreneurs experience are not unique and in fact–exceptionally common to almost every entrepreneur.

This does not mean that the creativity of Generation Y cannot be harnessed to develop unique products, competitive solutions and to be, yes, innovative. Mentorship programs need not be one way only–we often think of a Mentor as an older individual–young people can also run Mentorship programs teaching others–who are new to an industry, a way of thinking, how to be more creative. As we age, we become more risk adverse, how about a mentorship program that teaches us to be less prone to risk? How about a Mentorship program that engages social leaders at all levels and teaches us to be innovative?

Our next blog post will discuss how smaller cities can be more competitive in a global environment.

Entrepreneurship Challenges: Financing

For any business owner, the challenges are many – marketing, business growth, profitability and (amongst others) the ever-present challenge of financing. While financing can be a challenge to existing businesses, particularly those looking to expand, in this blog entry I’d like to examine how it impacts start-ups.

Prior to coming to OIN, I spent nearly 7 years in the financial services industry. While I focused heavily on insurance and investments, I did spend a significant amount of time with mortgages and leasing. I was in the industry during a very interesting time, the beginning of this economic shift or recession. All throughout I also managed to see how financing has changed and what it means for business owners.

It seems that these days money is free flowing for tech startups that may have weak (or no) revenue models. Quite simply, millions of dollars are being poured into products that may or not pan out. Of course, the ones that do are phenomenal successes, but these high stakes gambles lead me to ask what about everyone else?

The recent startup visa seems to be geared towards these gambles. While the start-up visa does not specify tech, it is most likely that hi-tech will be the main beneficiary of these venture capital funds. Again, while some of these multi-million dollar projects may create a few jobs, many tend to be short-lived, or absorbed by larger entities. Some may be shelved entirely with their assets stored away to pad a portfolio of patents. Long-lasting benefits to our communities, and are economies as a whole just tend not to happen as a result of these projects.

On the other side, we see small “Ma and Pa” type businesses that require long work hours, have capital needs of their own, and (the successful ones) tend to generate jobs and value for their local communities. These businesses tend to stick around over the long-term, diversify the local economy, and really form the bread and butter of our national economy – in the past 10 years, almost 60% of our new jobs were created by small companies like these. How much do these ventures require?

Many were started with less than $10,000. There succession does require significantly more financing, yet still far less then what the latest App may need, and with far less risk of failure. These are the types of businesses that we need, and unfortunately we are not finding effective ways to give them the capital that they need.

Within my work at OIN, I am constantly looking at ways that immigrants & newcomers can finance business succession opportunities. While traditional lending may work for some, it may not work for all. Sometimes an individual may not be deemed credit worthy, maybe the business is too risky, or some other factor influences. Regardless, there are likely cases where good businesses cannot start, expand or continue because of this barrier.

We are examining several different ways to counter these effects; first, by working with lenders to understand the challenges and potential rewards involved in these transactions. By using the mentorship component of our business succession program, we can reduce the risk to lenders by tapping into the tacit knowledge of experienced entrepreneurs.

Second, we are looking at exciting new finance models. Crowd funding and social impact bonds certainly top the list, although I am sure that new instruments will be created as the economy forces more of us into entrepreneurship and as traditional lending tightens. While it may sound silly, and possibly limiting today, the days of raising equity through a website $10 at a time are likely not far off. And, if our legislation catches up to that of the U.K., we may see Social Impact Bonds becoming a feasible instrument for transitioning businesses.

I hope this will not be taken as an attack on banks; I deal with them in personal and professional life, and without them economic growth would be at a standstill. However, I do feel that we need to look at new models if the old models cannot sold old problems. Please feel free to leave your comments and thoughts on any of these points.