Invested Investor Thoughts: Becoming an entrepreneur, what it takes
In this month's Thoughts, I will describe why I have had an entrepreneurial drive for the last four decades, what causes others to have one and what I have seen that makes a good entrepreneur.
I have thought a lot about what has motivated me, especially during times when a business I have founded has struggled. When I reflect on my failures, thankfully mostly as I’ve shut a company down before it goes bust, I know that I will try again.
My father was a dentist, in practice with his two brothers, which they inherited from their father. Yes, he employed people and did some marketing, although mainly “word of mouth”. He had to keep his customers/patients and staff happy and had to keep financial records. However, in the days, before private dentistry, the revenue each month was a single cheque from a division of the NHS. So, was he entrepreneurial or not? One of my other relatives owned a business called Humbrol, making tiny paint tins for modelling, employing several hundred people. Again, inherited from his father and although I didn’t like his arrogance, he took much higher risks.
Between school and university, I worked in Sydney for an entrepreneur as famous as Richard Branson is in the UK called Dick Smith, who had only a dozen employees at the time. Although Dick didn’t become a household name until I’d founded my first company, that is where I believe I decided to build businesses, for the reasons I will describe below.
At Uni, a friend (with whom I’m hiking in the Pyrenees as I write this) and I bought what was called a travelling disco, Brainchild, in the 70’s and ran it for a year, then sold it. We learnt the basics of researching what new vinyl single discs to buy, although my friend says we only bought two in the whole year, how to get new customers, balancing the books and repairing equipment as it got damaged between venues. I don’t think we thought we were taking much risk, although, I do recall we omitted to buy insurance.
After a few years working in a larger company, which grew from 300 to 600 staff in two years, and a year in a failing 15-person company, I took my first plunge at age 25 by forming Gercom in Bavaria. Four years later I formed Camdata in Cambridge, which my younger son Alan now runs 35 years later as a lifestyle business for us both.
What drove me and tens of millions worldwide to become an entrepreneur?
Change the world
This is both a grand and grandiose aim, and I have never thought of myself wanting nor capable of changing the world. However, I’ve always wanted, in a minor way, to change the world for my current and potential customers. Making things easier, more efficient, better value or simply more interesting for them than their current widget or process. This is also true for my employees as we know having interesting work within a good environment is what almost all of us want.
This was and is very important to me. Of course, until retirement, every one of us needs to satisfy someone else, whether one’s manager, one’s customers or one’s colleagues. In my opinion, there is a greater level of independence as a founder than an employee, which leads to being able, to a large extent, to control one’s destiny.
For many, circumstances may lead one to think about being entrepreneurial. When Camdata failed in 1991 I looked seriously at getting a job, but times were tough in the UK and I had probably already entered the ranks of the unemployable. So, I started Camdata again. Many who have lost a job think about setting out on their own, possibly setting up a business to offer their service to others. However, this is a personal opinion, I am not sure that a self-employed freelancer is entrepreneurial until they have taken on their first hire, i.e. revenue is not only from the founder’s time.
Being an entrepreneur can lead to more income and possibly more capital if the business is sold, but in my experience, a founder will rarely prioritise this.
Of course, there is a conflict here if the founders are seeking investment as angels generally like to get a multiple of their investment on exit, to offset the many failures. And if we get a good return, by definition, the founders will also.
There has been much written about the characteristics of entrepreneurs, such as persistence, passion and patience, but I want to cover a few others:
- In my experience, great entrepreneurs show they are frugal with their money and that of the company. They are likely to be savers and not spenders.
- They are great listeners, self-confident yet humble about their limitations. Willing and needy to learn from others. They exhibit a barely controllable level of curiosity.
- They are also capable of balancing their lives, both loved ones and friends, and their own physical and mental well-being. Or we hope so, as the stresses of building a business can be extreme.
With all the ups and downs in my life, would I have chosen the lives of my two hiking companions, who have both been employed for the last 40 years?
Absolutely not. Although I have had a more stressful life, I’ve enjoyed it much more than I could have ever imagined. Unlike my friends, retirement for me will involve continuing to do what I love. Helping and learning from entrepreneurs.