HNW Magazine July/Aug 2012

LINKING ENTREPRENEURS & INVESTORS UK-WIDE

High Fidelity, High Integrity The Ivor Tiefenbrun Interview

High Net World Magazine JULY/AUG 2012 IN THIS ISSUE

TURNING ON THE H.E.A.T. The High-growth Entrepreneurial Action Team Programme

Also inside: RUTHLESS: THE £50 BILLION INVESTMENT SCANDAL SPECIAL REPORT: BUBBLE, BUBBLE TECH IN TROUBLE INTERNATIONAL FOCUS ON… AMERICA PRACTICAL BUSINESS: OVERCOMING THE FEAR OF FEEDBACK W.A.W & W.E.N: HOW TO PITCH TO ANGELS

THE DIATRIBE

STEEL’S VIEW

GECKO’S DIGITAL LENS

FACEBOOK’S EMPIRE OR YOURS Page 51

POINT’S OF FEW: MONEY JARGON Page 15

BIG DATA, BIG FUTURE Page 17

283 9

Munros Nobel prize laureates

Just the one private bank.

www.adambank.com

THE EDITOR

HNW MAGAZINE JULY/AUG 2012

HEAT Means Business We’re turning on the HEAT over here.

THE High-growth Entrepreneurial Action Team or HEAT programme, despite its Americana-ring and Harvard Business School roots, is now very British.

not before we launch HEAT London on Wednesday 21st November!

HNW’s HEAT programme will address the express needs of “next stage” entrepreneurs; those who have achieved company growth, stability and recurring revenue streams but are frustrated at the barriers to higher growth and internationalisation.

This UK-wide initiative launches on Wednesday 19th September in Edinburgh bringing together a highly valuable gathering of 20 Scottish-based entrepreneurs. See our HEAT Scotland Showcase section on Page 6 for details.

The Art of the Possible We are delighted by the support from HEAT Scotland’s (Pre-Event Report, Page 20) inaugural sponsors, including Adam & Co Bank, HW Corporate Finance, MBM Commercial LLP, University of Strathclyde and Heriot-Watt University, who have been instrumental in making this programme possible.

Equally, HEAT Scotland’s programme ambassadors - the extraordinary Steven Moffat of Huan and Robin Mehta of Union Technology – have helped shape the programme’s deliverables through their unique experience and insights.

HNW also welcomes key speaker Ivor Tiefenbrun of Linn Products (Interview, Page 28), who will be joined by Paul Atkinson of Par Equity, NVT Group’s Stephen Park Brown and Ray McLennan of Angels Den. HEAT London And we’re not stopping there. HEAT Scotland will become a quarterly initiative thereafter with a rotating group of circa 20 established entrepreneurs, but

New “fracking” technology has turned once relatively anonymous states like North Dakota (missile silos and a national park) into a leading oil and gas producer.

And reports from across the Atlantic reveal CO2 emissions have fallen dramatically to their lowest levels in 20 years.

Heck, even the environmentalists can’t find traction to complain about this one.

So what’s that sobbing sound in the background?

Bank Conmnectivity Diagram – Credit DebtRank

Life After Armageddon Somehow the stock market has basically meandered upward, and nobody seems to have noticed.

Earnings are once again in pre-recession record high territory, yet bond funds somehow remain the investment crowd’s tool of choice over stocks by a margin of 20 or 30 to one.

Consider that UK investors have opted to move over £1 Trillion (not a misprint) out of equities in the last three months.

That’s despite tech companies in the S&P 500 alone paying out $41 Billion in dividends this year, not to mention $19 Billion from utilities.

There’s an ugly end on the horizon for the safety-seeking-bond-fund-buyers brigade. Maybe that’s why the analysts and commentators are still advising us that it’s time to buy party favours for the Mayan calendar Armageddon bash.

See Steel’s Points of Few, Page 14 and Mike Williams’ View from Manhattan, page 19 for more investment market truths.

“Fracking” Americans There’s seems little that can now stop the oil and gas revolution in America.

It’s the OPEC nations realising their longsuckling baby, the US, has just outgrown its 40-year dependence on the Middle Eastern oil & gas dummy tit.

Read more on this in the International Focus on…America, Page 33 inside.

Too Big To Fail Aaron Sorkin Ross’ book Too Big To Fail made for compelling viewing in its recent execution as a made-for-TV drama, as it revealed the inside story of how Wall Street and Washington fought over the banking crisis.

The technical truth is this: In a network, the liabilities of institution A become the assets of institution B, whose own liabilities become the assets of institution C (see DebtRank diagram here).

Put another way, the banking system is all connected, and a bank with a high volume of connections right at the centre of the assets and liabilities chain can spread significant financial distress.

Enjoy the issue.

Emerson

HNW Magazine Editor

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TURNING ON THE HEAT

CONTENTS P.5

Ruthless: The £50billion Investment Scandal

P. 6 Showcase: HEAT Showcase Entrepreneurs P.12 Networks: HNW Partners & Supporters P.15 Steel: The £1 Trillion Terminology Lesson P.17 Octigan: Gecko’s Digital Lens on Big Data P.19 Williams: Bond Trends & Ugly Ends P.20 HEAT: HNW’s Next-Stage Entrepreneurs Programme P.23 Feature: Wealth Tax? Let Them Eat Pasties P.25 Start-ups: Are You Classic Corporate or Market Mover?

P.26 WAW & WEN: Pitching to Angel Investors P.28 Interview: Ivor Tiefenbrun, High Fidelity High Integrity P.33 International Focus on...America P.34 Business Angel News: Of Syndicates & SMART Grants P.37 Special Report: Bubble, Bubble, Tech in Trouble P.41 Practical Business: RDR, Tax, Fear, and Roadmaps P.47 The GEM Report: The Annual Entrepreneurship Monitor P.51 Diatribe: Building Facebook’s Empire or your Own?

Published by HNW Magazine Limited. Registered Office 33 Oldwood Place, Livingston, West Lothian EH54 6UJ. The views expressed in HNW Magazine are those of invited contributors and not necessarily those of HNW Magazine Limited. HNW Magazine Limited does not endorse any goods or services advertised or any claims or representations made in any advertising in HNW Magazine, and accepts no liability to any person for loss or damage suffered as a consequence of their responding to, or reliance on, any claim or representation made in advertisements appearing in HNW Magazine.

By responding or placing reliance, readers accept that they do at their own risk. Reproduction in whole or part is forbidden without the written consent of the publisher HNW Magazine Limited. ©2012 HNW Magazine Limited.

Q Court, 3 Quality Street, Edinburgh, EH4 5BP For further information, please contact Stephen Paterson on: Telephone: 0131 625 5151 spaterson@hwca.com

RUTHLESS

HNW MAGAZINE JULY/AUG 2012

The £50 bn Investment Scandal The large print giveth and the small print taketh away.

CONSIDER the two scenarios below.

The first goes something like this: It’s Saturday. You walk in and sit down.

The representative quickly dulls your mind with talk of pensions, investments and ISAs, then laces up the initial chat with a glossy folder and brochure. You hear her say it’s their best product and that they take care of the fees.

Several signatures on short stacks of paper follow, none of which you’ve either read or understood. Then you’re off to golf or shop or drink coffee somewhere more interesting, your future safely in the hands of the “bank of whatever” and a gal named....ehhh.... what was her name again? Marjory maybe? Or was it Claire?

The second scenario isn’t terribly different from the first but it more often involves; a larger investment, more shiny brochures, larger stacks of paper to sign and the representative isn’t wearing a name badge. Oh, yes, and the meeting happens during the week because these wealth management folks don’t do weekends. They say it’s the best product for you and the fees are taken out of the investment or are “paid for by someone else”.

Both scenarios remind me of the doctor who says to the nurse during surgery: “We better save that. We’ll need it for the autopsy.”

Diagnosis Before Autopsy The problem with autopsies is that they always happen too late. The same goes

for investment errors which, if gone undiagnosed, become complete financial disasters.

You’re better off understanding how things work and the right questions to ask now, before your teeth sleep beside you at night.

First, there is a unique and unwarranted obsession with Index Tracker Funds and the oft-echoed phrase “You can’t beat an Index”.

The thinking is that they are cheap, neatly packaged for the masses and therefore must be the safest and best way forward.

The financial reality is very different.

Anybody who has followed the Index Tracker principle in the last 12 years has lost money hand over fist.

The Charging Scandal What lurks in the small print is that if you buy a product from an investment company or adviser you can be charged up to 7.5% commission up front for the plan to be sold in the first place.

The possible annual charges are up to 3%, and in many instances the advisers do very little to manage your account.

And you’ll probably have an extra 1% tacked on for switching one investment from one place to another.

Additionally, some fund managers charge dealing costs. We’re told these costs are reducing the returns on clients’ pensions, investments and the like by £18 billion per annum.

That’s £7 billion more than the entire Olympics cost.

When you tally up all of the above – initial costs, annual costs, switching charges – they equate to about 3 times the size of the £18 billion made off UK consumers in dealing costs alone.

Escaping Small Print Charges These charges are all voluntary.

Investment companies don’t have to charge at these levels, they choose to.

So consider this article the starting point to a brighter future.

Find an independent adviser to check out what you’ve actually agreed to.

And here are the key investment questions to ask:

1) What are the initial set-up costs, how are they paid and by whom?

2) What are the annual costs, how are they paid and by whom?

3) What are the switching charges, who are they paid and by whom?

4) What are the dealing costs, how are they paid and by whom?

5) What other costs/charges are there, how are they paid and by whom?

Then get them to put their responses in writing. Large print!

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HEAT SHOWCASE ENTREPRENEURS

HNW MAGAZINE JULY/AUG 2012

Programme Ambassadors

HUAN

Union Tech

Steven Moffat is a consummate entrepreneur, having founded 19 companies including a Design house, Internet Development, Fabrication, On-sales, Communications, E-commerce, Modeling, Publishing and Fashion.

Union Tech is part of the Union, one of the UK’s leading marketing communications agencies. In 2008 and 2010 the agency was the marketing Society’s Marketing Services Company of the Year in Scotland; as well as Scotland’s Agency of the Year.

Moffat spent most of the last 15 years leading the charge onto the Internet and creating a brace of ecommerce companies on his own platform and now has his eye set on our high streets.

The agency provides clients with the full range of integrated marketing communications services: advertising, design, direct marketing, sales promotion, field marketing, web design, online marketing and brand consultancy. Within the Union, Union Tech specialises in the development of websites and mobile applications for clients across all sectors.

Opening his first store in Edinburgh and promptly winning Scottish Fashion Award for Retailer of the Year, he is currently a finalist in the upcoming Drapers Fashion Awards having moved into fashion retail less than a year ago.

HEAT

Contact: Steven Moffat, Huan Limited: 111 George Street, Edinburgh EH2 4JN www.huan.co.uk

Contact: Robin Mehta Managing Director Union Technology Limited: Union House 18 Inverleith Terrace, Edinburgh EH3 5NS www.union.co.uk

Holoxica

Exec Air Charter

Component Sense

Holoxica is an award-winning company delivering a range of 3D holographic solutions: real out-of-the-screen 3D, the way it’s meant to be.

Execair, founded in 2006, is a boutique air charter consultancy specialising in a pay as you fly air charter service.

With 11 years’ experience in Electronic component resale, Component Sense has built and launched a “Cash Generation System” that utilises stock from large global electronic manufacturing companies, providing them with: Protection from Counterfeit Cash from surplus inventory Increased profit from their existing supply chain.

Our true 3D visualisation technology does not use glasses or optical tricks for viewing.

We make full-colour 3D-holograms for people who work in 3D to see their work in real 3D. Customers include scientists, engineers, designers and artists.

Designs range from bio-chemical molecular images and medical imagery to concept cars and complex machines. We make the holograms from computer models, scanned data or live images. Holoxica is also pioneering a holographic display, which is currently in the R&D phase.

Contact: Javid Khan, Founder Holoxica Limited: SMC, The Kings Buildings, West Mains Road, Edinburgh EH9 3JF www.holoxica.com

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We offer our clients an integrated and personalised service which exceeds their expectations and takes the stress out of travel.

We are Scotland’s first private aviation broker.

Execair work with a number of global sports and entertainment agencies, CEOs, VIPs and private HNWI clients providing a seamless point to point service.

Our mission is simple: To provide the ultimate travel experience every time you fly on one of our private charter services.

This allows us to provide staggering returns to our investors with minimal risk whilst providing world class service to our customers.

Component Sense is currently profitable, debt free and has revenue potential estimated to be in excess of $1Bn globally.

Contact:

We have scalable systems and processes in place and have already made in-roads with several “dream“clients.

Elena Torres, Managing Director Exec Air Charter Limited: 111 George Street, Edinburgh EH2 4JN www.execaircharter.com

Contact: Kenny Mcgee Group Managing Director Component Sense Limited: Fleming House, 5 Fleming Road, Livingston, West Lothian EH54 7BN www.componentsense.com

HEAT SHOWCASE ENTREPRENEURS

HNW MAGAZINE JULY/AUG 2012

Desk Union

Bongomagic

ProperQA

Desk Union offers a new way of renting desk space by connecting the start-up and freelance community (tenants) with businesses that have wasted space (landlords).

We build collaborative crowd sourced environments that provide flexible and affordable desk space to tenants.

Bongomagic is a unique and exciting online relationship marketing tool.

Founded in 2011 by industry veteran Nick Barrett, Proper QA is a service provider to the video-games industry, specialising in Quality assurance testing and the creation of practical test management tools.

Desk Union hubs enable co-working and encourage collaboration, skills sharing and networking.

Landlords earn cash from their wasted space, engage and interact with the local business community and create a buzz within their business space.

Desk Union provides a practical solution to generating revenue from wasted space as well as engagement with the local business community.

The technology harnesses the power of ‘word of mouth’ referrals and recommendations by allowing users to refer and recommend products or promotions to their social networks.

This process is further enhanced with the ability to offer rewards and incentives to those who contribute to a successful purchase or placement.

Bongomagic enables businesses to leverage the strength of referrals within their existing staff and databases to connect with a wider reaching, and more receptive audiences, touching existing and potential consumers beyond ‘one degree of separation’.

Contact

Bongomagic generates significant savings in marketing and recruitment resource, time and expenditure.

Victoria Arnold, Founder, Desk Union, Caledonia house, Lawmoor Street Glasgow, G5 0US www.deskunion.com

Contact:

Proper QA works with Publishers and developers ensuring their products are of the highest quality before being released to market.

Since launching the company as an outsource management consultancy practice, Proper QA has been broadening the range of services on offer and while they are sill helping games developers get the most from their outsource partners, they also have a team of full time professional games testers for hire.

Contact: Nick Barrett, Director Proper QA Limited : 6 Gloucester Square, Edinburgh EH3 6EB www.properqa.com

Laura Sullivan, Co-founder & Director Bongomagic: 16 Cromarty Campus, Rosyth Business Centre KY12 2WX www.larosco.com

Mallzee Mallzee takes shopping online to a new dimension with a product that increases sales, engages brand loyalty and improves customer satisfaction.

Our software finds products suited to users’ personal tastes and then allows them to create a personal shopping experience via their own online shopping mall.

This approach sees increased sales for our partners, as users are able to interact with their friends via social media around the products prior to purchase.

We provide online shoppers an experience like no other and offer our 200 partner brands the ability to engage in a more effective manner with retargeted personally designed advertising, influencer engagement and customer insight.

Bebaroque

Memory Box Network

Bebaroque is an award winning luxury hosiery and body wear label creating innovative decoration for the body.

Memory Box Network (word count 112) The Memory Box Network is a social media based online platform that allows people affected by dementia to upload and share content such as photos and films for use in reminiscence therapy.

Unique design, at the heart of the bebaroque brand, is seen through distinctive screen print and hand embroidery, which combine to create a desirable signature style that is increasingly being recognised and celebrated within the industry.

Contact:

Our work enables people to find and use material easily. Dementia can be a terrible condition and affect both the person with the condition and their carers, friends and family.

All of our work is aimed at enabling a better quality of life for those affected by dementia.

Mhairi McNicol Co-founder Bebaroque Limited: Quadrant Building, 17 Bernard Street, Edinburgh EH6 6PW www.bebaroque.com

We look at new and innovative models in the 3rd Sector for production and funding in order to bring a commercial overview to charities’ normal activities, and allow them to become self-sufficient.

Contact:

Contact:

Cally Russell, Chief Executive Officer, Mallzee, c/o Ambassador Uni Limited, Caledonia House, Lawmoor Street Glasgow G5 0US www.mallzee.com

Scott Downie, Chairman The Memory Box Network Limited: 6 Panmure Street, Dundee DD1 2BW www.memoryboxnetwork.org

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Are you Are you embarrassed embarrassed about your about your company’s company’s website? website? you are not alone... you are not alone...

to be able to stand tall and feel good again contact to be able to stand tall and feel good again contact

0131 3390 0131 240 240 3390

geckonewmedia geckonewmedia Interactive solutions for proactive business

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Web: www.geckonm.com Tel: 0131 240 3390

Web: www.geckonm.com Tel: 0131 240 3390

44 Melville Street, Edinburgh EH3 7HF

44 Melville Street, Edinburgh EH3 7HF

HEAT SHOWCASE ENTREPRENEURS

HNW MAGAZINE JULY/AUG 2012

KILTR

Surface Active Solutions Ltd

Gecko New Media Ltd

KILTR gathers together a clan of thousands of individuals with a connection to Scotland to share, exchange and work on new and creative ideas, goals and projects.

Surface Active Solutions Ltd, based in Grangemouth, develops and supplies unique chemistries for the oil industry.

Gecko New Media Ltd is a digital agency that specializes in user-centred design, helping businesses make the most from their online interactions.

Joined by a shared identity, regardless of geographic location or economic status, KILTR forges new bonds through a vibrant international community driven by endeavour and enterprise and an exciting structure of like-minded people.

Contact: Brian Hughes Chief Executive Officer Kiltr Limited: The Printworks 10 Otago Street, Glasgow G12 8JH www.kiltr.com

SAS products reduce waste from exploration activities by 90% while reducing rig time by 70%. The use of SAS products in refinery waste recovers virtually all oil and reduces waste by 85%.

The company is owned and managed by its founders John Harrison and Mark Zwinderman. Active around the world, SAS owns a patent portfolio of six granted patents and 7 patent applications. The company supplies its products around the world to operators, waste management companies and service companies.

Contact:

Since 2003 we have delivered sustained growth and profitability by helping a diverse range of clients across the public, private and third sectors achieve their goals.

We are the first Certified Umbraco Solutions Provider in Scotland, Members of the Usability Professionals Association, and our Staff members have received the Google Analytics Individual Qualification.

Our experience and creativity helps deliver commercial success for our clients.

Contact:

Mark Zwinderman, Commercial Director Surface Active Solutions Limited: Grangemouth Technology Park Unit 1, Earls Road, Grangemouth FK3 8UZ www.surfaceactive.com

Mike Octigan, Managing Director Gecko New Media: 44 Melville Street, Edinburgh EH3 7HF www.geckonm.com

Klick2Learn

Distrify

K2L has developed a unique learning management system with web conferencing facilities combining to create the most user friendly virtual classroom environment available today.

Distrify is the fast-growing online cinema with integrated viral marketing tools offering filmmakers and distributors the opportunity to reach audiences worldwide.

Transcribe UK Transcribe UK is an online transcription company that uses highly experienced UK based secretaries to convert audio files to word documents for business, medical and legal sectors.

We have been providing a cutting edge digital dictation transcription service throughout the UK since 2005.

Our award winning iVano™ Workflow Management and Case Record Management Solutions can be licensed, enabling other companies personnel to use iVano™ with the option to outsource transcription to Transcribe UK. We also provide tailored Admin Support packages, which include a telephone number with a dedicated receptionist and a transcription pool or dedicated secretary for dictation.

Contact: Ada Galloway Director Transcribe UK Limited: The Old Barn Offices, High Peacockbank, Stewarton Ayrshire KA3 5JG www.transcribe-uk.com

The company specializes in developing engaging interactive content for the ESOL market and will deliver real qualifications, available virtually, approved by the Scottish Qualification Authority.

K2L has an in- depth knowledge of the needs of the ESOL markets, and an understanding of trends in the expanding global market of online education. The company will produce a range of exciting products encompassing games based learning and cutting edge avatar technology.

The Distrify model turns every trailer for a film into an instant VoD player allowing the customer on discovering a film to click ‘rent’ or ‘buy’.

Film fans are rewarded for sharing trailers with their contacts and film critics, online publishers and film fans are able to curate their favourite film collections and earn money for their efforts.

Not only does Distrify offer international distribution, but it also ensures that the majority of the revenue earned back by films is passed back to the filmmaker.

Contact:

Contact:

Tony Hamill Commercial Director K2L Limited: 50 Richmond Street Glasgow G1 1XP www.klik2learn.com

Peter Gerard Chief Executive Officer Distrify Limited: Glasgow Film Theatre 12 Rose Street, Glasgow G3 6RB www.distrify.com

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MBM Commercial is an award-winning niche commercial legal firm which has a focus on working with investors, entrepreneurs and high growth companies.

Contact Us For further details about MBM Commercial LLP, please contact: Edinburgh Office 5th Floor, 125 Princes Street, Edinburgh EH2 4AD T.

0131 226 8200

F.

0131 226 8240

E.

info@mbmcommercial.co.uk

Oxford Office The Dairy, Chilswell Farm, Boars Hill, Oxford OX1 5EP T.

01865 601 240

E.

info@mbmcommercial.co.uk

www.mbmcommercial.co.uk MBM Commercial LLP is a Limited Liability Partnership registered in Scotland with Registered Number S0300552 and regulated by the Law Society of Scotland. A list of members of MBM Commercial LLP is open to inspection at the Registered office. All correspondence signed by a named individual is signed on behalf of MBM Commercial LLP. Registered office: 5th Floor, 125 Princes Street, Edinburgh EH2 4AD.

HEAT SHOWCASE ENTREPRENEURS

HNW MAGAZINE JULY/AUG 2012

HEAT Scotland Entrepreneurs: Expressed Barriers to Growth CodeCreatedMe CodeCreatedMe is a tech business based in Glasgow that developed its first product, Travel Bit, as a web app and mobile app for iOS. Travel Bit eases the packing process for your holidays and provides a simple list of information all about your holiday destination.

We are also working hard to create a more vibrant and conjoined tech community in Scotland through RookieOven. RookieOven is a unique initiative that highlights the best events, startups and people involved in the nation’s tech scene.

CodeCreatedme founders include Michael Hayes CEO, Chris Sloey CTO, Kevin Ormond CCO.

Contact: Michael Hayes Chief Executive Officer CodeCreateMe: 32 Bellfield Crescent Barrhead, Glasgow G78 1HL http://codecreated.me

CluisTROM CluisTROM is a Scottish based company that carries a unique product portfolio from custom moulded noise plugs to cutting edge electronic shooting protection. Our earplugs allow the wearer to hear normal conversation while still being protected against damaging noise.

We are the sole distributer in the UK, Ireland and South Africa of the smallest hearing aid module in the world and the key note supplier of hearing services to the VisionCall group.

CluisTROM is the official hearing protection supplier to BAE systems, Babcock, TARMAC, SAICA Pack and The Murphy Group, and are now the sole supplier of custom hearing protection through the ARCO catalogue.

Contact: Neil Mcintosh Chief Executive Officer CluisTROM Limited: Olympia Arcade High Street, Kirkcaldy KY1 1QF www.cluistrom.com

The below responses have been received directly by the next stage entrepreneurs attending on the day.

They break down into the following categories:

Marketing, Sales & Conversion:

Finding clients and convincing them your services is better than everyone else, but is that the best approach?; Finding clients for a new technology when professional as opposed to consumer market focus makes more sense as the latter requires enormous marketing budgets; Third-party vendors and paying for procurement list access and nothing coming of it in terms of actual business orders; Marketing spend on making ourselves look bigger than we are so we can sit at the right table; Changing the mindset and archaic rules on what 3rd sector organisations can do to make money;

Funding, Support & Transition:

Getting next stage funding; Approaching banks without collateral; Creative ideas to fund cash flow; Holding proven technology that generates large & repeat orders but require funding for targeted marketing and increasing sales capacity; Funding for rapid scalability – not just cash; How to find support when you’re not in the biotech or renewable energy sectors; Scottish Enterprise high-growth pipeline hasn’t helped at all – need a better business resource network; Moving from technology led to a market/ customer led business;

New Markets & Internationalisation:

Expanding into multiple new markets simultaneously; Logistics, money transfer, credit card payment issues related to large proportions of international customers and key suppliers;

Outgrown Existing Advisers:

In need of honest answers fast but not yet comfortable paying the big bucks that the big boys charge without proof; Looking for a lead in scenario for entrepreneurs into more experienced advisers and stage the higher charging until the money follows;

Staffing & Training:

Finding quality staff and spending 3 + months on them before they’re productive (if ever); Not being able to afford additional members of staff though they’re potentially vital to scalability.

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THE NETWORKS

HNW MAGAZINE JULY/AUG 2012

HNW magazine prizes its relationships with leading organisations in the entrepreneurial and investor sectors and is delighted to provide direct links and information to these organisations below.

HNW Magazine Dis HNW Magazin

HNW Magazine Distribution Part

Angels Den

ASAM

Footdown

The only Angel investment network to provide free business funding clinics and one-to-one pitching at regular SpeedFunding events throughout the UK and Asia, with regional managers dedicated to supporting and introducing you to the right Angels.

If the confusing messages in the financial media leave you not knowing which way to turn, and you want to reduce your risk and organise your future with more certainty, contact Alan Steel Asset Management’s award-winning team.

Mentoring. Insight. Coaching.

Footdown is passionate about improving the performance and quality of leaders, and works from within a peer group to inspire, inform and help leaders respond better to all challenges.

www.angelsden.co.uk

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www.alansteel.com

www.footdown.com

THE NETWORKS

HNW MAGAZINE JULY/AUG 2012

Gecko New Media

www.geckonewmedia.com The straight-talking Edinburghbased digital agency that helps you make sense of the web, providing strategic planning, design & build and leading edge solutions that help your business grow.

Kiltr

www.kiltr.com Kiltr is a leading edge professional social network for everyone with a Scottish connection, founded with the local-to-international Scottish Diaspora at its centre.

LINC

Jumpstart

www.jumpstartuk.co.uk The leading research and development (R&D) tax credits advisory business for companies throughout the UK with a 100% success rate for Government R&D Tax Credit applications.

www.lincscot.co.uk The national association for business angels in Scotland, with a membership network of hundreds of investors including those operating individually, many of the best known groups and syndicates, and a number of significant private offices.

Par Equity

www.parequity.com Par Equity is an investment firm with a difference. We bring a pragmatic, hands on investment approach and extensive business experience to investment opportunities that have the potential for significant returns.

Scottish Family Business Association

www.sfba.co.uk The SFBA is the definitive authority on family business issues in Scotland operating as non-profit solutionsfocused organisation created for and by family business people.

stribution Partners ne Distribution Partners

tners

HNW Magazine Distribution Partners

“

Scottish Social Enterprise Coalition

www.socialenterprisescotland.org.uk Social Enterprise Scotland is the national collective voice for social enterprise in Scotland, bringing together social enterprise and its supporters into a strong force for change.

Thrive for Business

www.thriveforbusiness.co.uk Thrive is a membership based networking organisation for business-to-business SMEs across Scotland bringing together likeminded individuals willing to share knowledge, ideas and contacts in an unrivalled atmosphere of talent and enthusiasm.

The leaders we revere and the businesses that last are generally not the result of a narrow pursuit of popularity or personal advancement, but of devotion to some bigger purpose. That’s the hallmark of real success.

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Barack Obama 13

STEEL’S VIEW

HNW MAGAZINE JULY/AUG 2012

Steel’s Points of Few: The £1 Trillion Terminology Lesson I don’t know much about fencing, but the below quote from writer Bill Bryson really hit home with me the other day: “A lot of people don’t like fencing because of the rules and terminology. It’s simple.

There are 4 thrusts - the cartilage, chaise longue, aubergine and fromage anglaise - and they are parried by - the pastiche, penchant, demitasse, or salmon en croute. Scoring is one point for a petite pois, two for a baguette. Points are lost for foot faults, or pied a terre, or illegal lunges known as zut alors. Actually I don’t have the faintest notion what goes on, but it’s fine because it’s the Olympics.”

The same is true with money.

People don’t understand it; the financial jargon, the influence of the doomsday media analysts, and the principal that “the large print giveth and the small print taketh away.”

So folks keep doing the opposite of what they should do.

Read The Sentiment Every time I suggest the market’s “sentiment” is a strong clue of what is likely to be the best investments to buy for the best returns I get howls of complaint from those who still rely on

public opinion, mainly influenced by TV pundits.

See a herd moving one way. Move in the opposite direction.

Sentiment in March ‘09 was rock bottom for shares. So public opinion as usual won the day.

Since then net outflows in the US have led investors to pull over £210 Billion out of equity funds … and buy over £370 Billion in Long Dated Gilts.

The result? Ordinary investors – the herd - missed out. Shares have outperformed gilts by over 37% in only 3.5 years.

And the market sentiment toward gilts was to seek safety.

Albert Einstein captured it best when he wrote: “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”

He also saw compound interest as one of mankind’s greatest inventions.

Against The Herd In the UK alone, £1 Trillion has been removed from equities by UK investors ... wait for it ... in the last three months.

Why? A year ago when the pessimists were rejoicing in their dire predictions for the World economy and causing great nervousness, investors opted to stay in deposit accounts.

Then, after earning the square root of nothing, they put a good few pounds into Gold funds, such as Blackrock.

And there followed a pile of negative returns after tax and inflation for the deposit “safety first” brigade, and a 20% loss ignoring inflation from the Blackrock Gold fund refugees.

It wasn’t curiosity that killed the cat, it was ignorance. Curiosity was framed!

History Repeats I know the cycle can be confusing. The market goes up and the analysts say it’s going down. The market peaks and the commentators say “pile in”. Then it drops and the herd gets slaughtered.

So right now we’ve got that process backwards as £multi-billion are leaving equities and lumping into bond funds.

It’s a move to perceived safety and it simply doesn’t add up.

Why all the fear? Probably because the majority of daily headlines read: “Due to current economic conditions, the light at the end of the tunnel has been turned off.”

Now this may not be the stockmarket your granny remembers, because the sectors paying the biggest dividends have changed and the numbers have all gotten bigger.

But like your grannie, it still repeats itself!

Alan Steel, Chairman, Alan Steel Asset Management

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GECKO’S DIGITAL LENS

HNW MAGAZINE JULY/AUG 2012

Gecko’s Digital Lens Big Data, Big Value FEW said it better than American astronomer, scientist populizer and author Carl Sagan who wrote: “All of the books in the world contain no more information than is broadcast as video in a single large American city in a single year. Not all bits have equal value.”

These are all grand transformations and their convergence even more so.

The so-called melding of Big Data, Wireless Broadband and Computational Manufacturing (printing 3-dimensional objects...like houses!) is already here, we just don’t know it yet.

Indeed they do not. The blistering pace of data creation, described by the highly quotable and then-Google CEO Eric Schmidt in 2003, begs a solution, as every 2 days we create as much information as we did from the dawn of time up to 2003.

These three are the pillars of the new information economy, and its justification resides in a simple scary truth; that the lion’s share of economies like the US are already devoted to moving ideas and information bits, leaving people and products as the second class package for delivery.

In simplest terms, where do we put it all?

How can it be characterized and given meaning, called upon later to provide insight and direction?

And how do we cope with another twoday cosmic data stretch?

Scientific sentiment suggests we’re on the precipice of another technological transformation....again.

Though predictions make for fickle destinies, try we must. And the most obvious and compelling suggestions about the path from tech-now to techfuture sit amongst data control, the world without wires and the seemingly fantastical 3D printing renaissance.

And employment is following suit by filling the tech skills shortage gaps.

The McKinsey Global Institute (MGI) reports that areas like Big Data – datasets too large for typical database software tools to capture, store, manage and analyse – are becoming the key basis of growth for brand owners.

Think about it like an enormous data sieve, capturing the relevant shiny bits of information from a sand hill that is growing by 40% per year, while global IT spend is only rising by 5% per annum.

And the information age herald? Not unlike Vodaphone, who in the late

1990’swas the go to investment option to beat the stockmarket index, the newly crowned world’s most valuable company by market capitalisation, Apple, has made its $multi-hundred billion fortune by outselling competitors like Samsung, not by moving iPhones products – they only have 9% of the global market at this stage – but by moving data.

So what do you do with it? A survey

by Sky IQ revealed about 1/3 or chief marketing officers are asking that very same question, overwhelmed by volume and searching for value in information overload.

Big Data strategy is the extraction of insights from enormity, understanding the data source and then working out how to consolidate it, and then formulating a strategy to analyse and act upon it.

And the brands that are making it work are the ones focusing on the insights they really need, the relevance sieved free mountains of sand; the salient value from the incomprehensible volume of information....where less is more than enough.

Mike Octigan, MD, Gecko New Media

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Aye Cloud

New Technologies New Economy New Scotland One Constant ...

To find out more visit nvtgroup.co.uk Tel. (+44) 08453-893-300 NVT Group

MIKE FROM MANHATTAN

HNW MAGAZINE JULY/AUG 2012

MIKE WILLIAMS: THE VIEW FROM MANHATTAN Bond Trends & Ugly Ends

The Flipside

The money headed out of equities and into bond funds is so great you’re considered a fool if you’re not “part of the flow” just now.

As with all trends that approach ugly ends, we have to ask ourselves what the flipside looks like in order to find value.

The flipside here is the very discomforting notion that taking risk and looking for growth is in fact the other side of the coin.

But it’s all unlikely to end well.

“We tell folks that until we’re blue in the face but they don’t listen when we say: It’s an ugly looking end for the bond trend.”

And yet these same yield buyers had little interest in them when ‘10-Years’ were grabbing 4% back in April 2010!

Back then they could have been wearing a sign on their collective foreheads saying “Makes sense? Not Interested.”

Where We Are In The Cycle On October 9, 2007, the market reached its current record high of 1565 on the S&P 500.

At its record high, Dr. Ed Yardeni reminds us that the forward earnings were 103.62. No one knew what was to come thereafter.

The market then sailed down an ugly pathway until March 9, 2009. Since then we’ve been told “the world is ending.”

After the end of the world (Part MLXXVII) the S&P 500 is now just 9.4% below its previous all-time high.

“Consider this: year-to-date, tech companies in the S&P 500 have paid out $41 Billion in dividends versus just $19 Billion in the same from utilities.”

This is most definitely not our Grandparents market anymore. Change is all that can be promised in the future.

Mind you, the one danger in this theory is that it often takes maybe 3 to 5 years to see it clearly. That’s long after the values have exited and we want nothing to do with them.

Make no mistake, in the assets we oversee three of the best performing stocks have been food companies since the volatility struck the world economy back in late 2007, and then exploded onto the scene in mid-2008.

unspoken than the headlines permit you to see.

Like my Dad often said to me: “Hey Mike, elephants don’t bite you in the ass, mosquitoes do!”

The mosquito in this story is not the drastic event that takes our breath away when we see them on the news or in 48type print on our favourite website.

It’s the herd-mentality thoughts that steal our opportunities.

An Uncomfortable Answer It’s not what you might think. Make market fear your friend and take your share of what is now cheap.

“We suggest you pray for market setbacks, the likely turbulence from the impending election over here and more media ‘red ink’ to drive the herd the wrong way - into more bond funds.”

The Bottom Line

That gives the savvy folks greater longterm value in underpriced equities, and helps you avoid an ugly investment ending that was, in the majority, once perceived as safety.

The dangers are not in the obvious stuff. The dangers are more delicate and

Mike Williams is President of Genesis Asset Management in Manhattan, NY

Forward earnings are now $110.81; a record level after what has recently been described as another “paltry” earnings season.

The P/E at the high was 15.1 and today it is 12.7. In other words, the market has become 15% more valuable while the masses have left the building.

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The High-Growth Entrepreneurial Action Team “HEAT is an acronym born of the Harvard Business School in the mid 90’s to address the needs of next-stage entrepreneurs; those who had achieved company growth, stability and revenue streams but were frustrated at the barriers to higher growth and internationalisation.”

HEAT Scotland Wednesday 19th September 2012

THIS EVENT IS SPONSORED BY

HEAT SCOTLAND

HNW MAGAZINE JULY/AUG 2012

HEAT SCOTLAND The High-growth Entrepreneurial Action Team (HEAT) Programme

DATE: Wednesday 19th September 2012 TIMINGS: 10am to 2:30pm –

optional breakout sessions 2:30pm to 3:30pm VENUE: MBM Commercial, Edinburgh Office

5th Floor, 125 Princes Street

Edinburgh EH4 2AD ARRIVE: 9:30 for 10am start

THE HNW Magazine HEAT programme

HEAT Scotland

WE are delighted to announce the inaugural HNW Magazine Highgrowth Entrepreneurial Action Team or HEAT programme on Wednesday 19th September in Edinburgh.

HEAT Scotland will bring together core groups of up to 20 established entrepreneurs on a quarterly basis and who represent a diverse range of industry sectors here in Scotland.

HEAT Scotland marks the beginning of a regular series of UK-wide initiatives designed to address the business needs of “next-stage” entrepreneurs.

You can find further details about the companies coming together for the launch initiative in the HEAT Scotland Showcase section starting on page 6 of this issue.

This is no simple task. While support programmes, incubators and accelerators proliferate for new startup businesses, there is little by way of formal programme support to ensure next-stage entrepreneurs succeed through the business barriers to UKwide growth and internationalisation.

We are delighted to have two inspiring and successful entrepreneurs, Steven Moffat of Huan and Robin Mehta of Union Technology, as our HEAT Scotland programme ambassadors, without whose insights and experience this programme would not have come together.

The HEAT concept originated at the Harvard Business School over fifteen years ago to identify out the high growth challenges faced by fledgling and seasoned new business creators.

Our key speaker on the day, the incomparable Ivor Tiefenbrun of Linn Products, will be joined by business angel elite Paul Atkinson of Par Equity, renowned tech sector entrepreneur Stephen Park Brown of the NVT Group, author and Angels Den extraordinaire Ray McLennan, Heriot-Watt University’s Converge Challenge aficionado Olga Kozlova, renowned dealmaker Stephen Paterson of HW Corporate Finance, entrepreneurial sector guru Sandy Finlayson of MBM Commercial, and sector experts from Adam & Co Bank and the University of Strathclyde.

HNW Magazine is carrying the HEAT programme forward, with plans to launch in eight cities throughout the UK over the next 24 months.

HNW Magazine’s HEAT Scotland sponsors are the leading lights in their fields and have made this initiative possible. They are HW Corporate Finance, University of Strathclyde, Adam & Co Bank, MBM Commercial LLP, HeriotWatt University, Gecko New Media and the NVT Group.

Linking Entrepreneurs with Investors & Advisers UK-wide HEAT Objectives: Succeeding Through Success HEAT speaks to entrepreneurs whose businesses are succeeding but who need to adjust their company’s management, employment, structures, funding, leadership, and thinking to further capitalise on that success.

Growth is good if you’re able to manage to it.

HNW Magazine surveys its individually invited HEAT attendees in advance of each event to understand the key issues they are facing and, through our speakers and supporters, address these express needs on the day of the event.

But it doesn’t stop there. HNW will continue to track the progress of these companies as they grow and develop.

HNW Magazine’s role, linking entrepreneurs with investors and advisers UK-wide, brings together the gamut of entrepreneurial, venture capital, business angel, HNWI and advisory communities.

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37

WEALTH TAX

HNW MAGAZINE JULY/AUG 2012

Wealth Tax? Let Them Eat “Pasties” The proposed new temporary wealth tax, while arguably more about political timing than fiscal-mindedness, does appear more enduring than some of this year’s less digestible ideas, like the now infamous “pasties tax” that cooled quickly in the wake of public outcry on the VAT bakery items could attract.

BUT sentiment of the masses be damned, the coalition continues to suggest Government interventions to underpin an economic recovery.

This time round the Nick Clegg constructed “time-limited contribution” idea of taxing wealth rather than income appears to sit well alongside that party’s alignment with a mansion tax on properties worth over £2million.

These are somewhat strange bedfellows to the forthcoming income tax reduction from 50p to 45p in April 2013; a so-called millionaires tax break.

But they are certainly in line with Government’s pursuit of a policy capable of reflecting high asset wealth in the tax system - an HMRC “Holy Grail” as the Revenue continues its sound and fury position on tax avoidance schemes.

However, the solution to in-built disproportionate tax breaks for people at the apex of the income hill remains far closer to a full system rewrite than a single programme miracle fix.

The Government’s dire record in attempting to make the uber–wealthy, businesses and individuals alike, coughup is the stuff of legend like taxing; oil companies just before the price collapsed and bank super profits just prior to the sub-prime debacle.

The taxpayer continues to bear the burden.

It was imagined that the 50% tax would solve many problems.

But when high earners had had enough they chose to either “earn less” or exit stage left. The same came true with double NI contribution charges, with no additional benefit in retirement. Business owners who prior worked to “the spirit of law” sought out other options.

So should we pay attention to the move toward a wealth tax, temporary or otherwise?

The details are scant at this stage though it would appear Clegg & Co are looking for two new tax revenue streams; one on mansions, and the other T/B/C – to be concocted.

There’s enough historical tax fodder there to grill a pasty-faced politico to a crisp, the mis-steak in judgement only revealed when under secretary, Bridie MacMince, says: “We were just trying to grab a bigger slice of the pie.”

Better we take the advice of Milton Friedman to: “Drop marginal tax rates and let the small business entrepreneurs respond by making more, and employing more.”

But we have to ask ourselves how temporary or limited this tax might be and if there is a ceiling on the value of assets that can be considered?

And that final point is a doozey – if there’s no limit on the value of taxable wealth, the asset-rich income-poor folks could be ruined in a click of the Chancellors briefcase latches.

The other side of that coin is if there is a limit. That means the potentially swift and highly detrimental shift of capital out of the country could depend on whether temporary measures become permanent rules.

One final dilemma would be the labour and time intensive requirement to evaluate the wealthy when the Revenue already suffers from severe under resource.

A for more likely outcome here would be that the proposed wealth tax eventually travels the path of the Pastie; let it cool for a while, then watch it disappear.

The Level of Wealth Inequality in the UK (Courtesy: the Office for National Statistics ONS) • In 2008/10, aggregate total wealth (including private pension wealth but excluding state pension wealth) of all private households in Great Britain was £10.3 trillion • The wealthiest 10% of households were 4.3 times wealthier than the bottom 50% of households combined • The wealthiest 20% of households owned 62% of total aggregate household wealth • In 2008/10, the least wealthy 10% of households still demonstrated negative values for both net financial wealth and net property wealth.

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23

START-UPS

HNW MAGAZINE JULY/AUG 2012

Start-Ups: Are You A “Classic Corporate” or “Market Mover”?

Launching a start-up is not for everyone.

AND no one can prepare you for the trade-off between corporate lifestyle and start-up tribulations, particularly if you’re moving from one to the other.

So you’re bettering asking yourself before you begin: Are you happy being working class corporate or do you want to try to be a market mover?

The answer is not as obvious as you may think.

First off, many entrepreneurs don’t consciously make that initial decision; it simply becomes a part of their lives by default. They fall into their roles trying to fix something they see as broken, improve what they believe can work better or by changing something no one thought needed changing in the first place.

Ultimately, adapting to changing circumstances and direction is prerequisite to start-up success. That’s because the idea that first inspires is rarely the one that makes it to market.

By comparison, change in culture, methodology or working practice in a large corporate environment is often as welcome as a snake in your sleeping bag.

A more practical perspective on the pros and cons of corporate working versus the throes of entrepreneurialism is required reading before you consider one route over another.

Corporate Resources, resources, resources.

Specialist training, additional qualifications, sabbaticals and employer exchange programmes.

Corporate career journeys on the company’s expense account are a major sweet spot to working in large organisations and enjoying “jacuzzi privileges” on the big boat.

There are pros and cons here. Vast resources at your disposal can allow you to learn from and or implement the best a company has to offer, but can also create unnecessary reliance on the same and a lack of learning on your own part, where you miss out on collecting some skill sets.

If you’re polishing your CV as you ascend the corporate ladder it can open doors going forward, particularly when progressing in the same industry sector. Often the job you do can sound even a bit more complicated than it actually is and your CV becomes a thing of dazzle and splendour.

Additionally, outside the core business areas await a plethora of cubicled zones deigned for things like support, administration, human resources, customer service and other pieces of the less volatile world of mainstream business.

A sojourn through these options as part of your career journey can help focus your future, and perhaps even point to something you’d like to see work better beyond the corporate safety zone.

While job security is as rare as a final salary pension scheme these days, the multinational firm is the land of the risk-averse and can allow you to feel business confident when the nightly news tells you otherwise.

But it’s not all wonderful. Executing change in a large corporate business is like pouring molasses in January; slow, cumbersome, often frustrating and likely to get very very sticky. That, and attract group wide resistance amongst the corporate comfortable set. To the entrepreneurially minded this can be a soul-destroying experience.

Beyond bureaucracy you will likely operate in a clearly defined role learning to be part of the machine and coming to understand only certain aspects of the business. There will be daily lessons in diplomacy, a hearty serving of institutionalised mindsets and gamesmanship ranging from blame culture cliques to creditseekers and suck-ups.

Well what did you expect? This is a magazine about entrepreneurs!

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WAW

HNW MAGAZINE JULY/AUG 2012

What Angels Want

Be Clear, Credible, Detailed & Evidential: Plain Facts Use clear, jargon-free language which gets straight to the point; no hyperbole.

Use a clear lay-out for easy fast reading and a concise executive summary.

Use credible references for all the main product claims and honesty about how market size estimates have been arrived at.

Use detailed explanation of why someone should buy the product and why the channels should take it.

Pitching to Angel Investors You probably only have a few minutes, your investment success or business failure balanced precariously on your ability to present and deliver your message confidently and sensibly.

So how exactly do you do that? How do you turn on your audience, get the second date, and get the cheque in your hand?

Below is a sample of eye-openers from Business Angel for those seeking funding, and maybe even for investors along the way: The Overly Adventurous Business Plan “A few things that really irritate me in business plans: • The worldwide market is £XXXmillion and we only need to get Y% to achieve our projected turnover.

• Start-up, no track history, no firm orders - projecting exit in Y5 of say 20x investment.

• Management team expecting big salaries, without investing own money and offering little equity.

• I am sure these are fairly standard but they lose my interest very quickly.”

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Use evidence that people with experience of the target customers and market have been involved in the project/product design.

People, Product & Potential: Assessing the Entrepreneurial Team People Can I get on with them? Will they listen?

Will they take advice and act on it? Have they any experience in the sector? Do they look like they can run a business or are they really looking for a job?

Product I think anyone can stand in a shower and come up with an idea, which I think most proposals are; do I understand it, do they understand the market, have they fully understood the costs of running a business and costs of getting stuff to market?

Potential Has the product the potential to become a business that employs people, turns a profit, pays a dividend, and maybe that someone will want to buy? I always start from the point where there will be no buyer and think what am I investing in.

And is there a plan B or maybe a plan C. I get the impression their Plan B is to get a job they won’t be getting funding.

“Skin In The Game” “There seems to be a wide range of capabilities amongst aspiring entrepreneurs.

If they are start ups, they tend to be a bit vague in their pitches and appear to avoid giving any numbers. Often they don’t appear to have been thought through and the only input from the ‘entrepreneur’ is the idea, so they have nothing to lose, whereas the investor has everything to lose. I expect to see them have some ‘skin in the game’ as opposed to being an alternative to an unsecured bank loan.

I’ve seen some established businesses that look pretty good but again there seems to be a reluctance to give any numbers up front. I can understand why entrepreneurs would want to hold back on the detail until an interaction is happening, but I think they should give some top level numbers in their pitch, to whet the appetite of potential investors.

Also, I’ve had a couple of pitches from firms with web sites and the web site content contradicts something in the pitch - it is critical that they match otherwise the credibility goes straight out the window.”

Quality Not Quantity I don’t need to know too much about the entrepreneurs plans in a business.

As an investor I’m interested in figures.

If a business proposal has the best plan and the best 10 page report but won’t make me any money then it’s not a business to me so as an investor I retreat from it.

I feel business people seeking investments should focus more on the numbers and dates, if I receive a 1 page report from an individual with figures they can achieve and the dates, I would invest into such a venture without delay. It’s about quality not quantity!”

WEN

HNW MAGAZINE JULY/AUG 2012

What Entrepreneurs Need Pet Hates & Good Traits: Here’s a few good traits and pet hates that have a canny knack of annoying or pleasing me: Hates entrepreneurs that: • think that we will take all the risk

doesn’t fit it is a waste of both our time.

• Recognise that the single purpose of the first approach is to start a dialog and thus it should contain sufficient information to enable me as an investor to decide whether there is the possibility of a good fit.

of us are going to be right 100% of the time).

“At the end of the day people buy people, investment is no different..”

The Biggest Mistake Entrepreneurs Make During the Pitch

+ if there is a ‘fit’ stage 2 is more info (preserving my anonymity)

What’s the No. 1 mistake entrepreneurs make during the pitch?

• grossly over value their business and then get hacked off with you when you ask them to justify it

+ Stage 3 telephone call

Confusing their technology or business as the top priorities over the financial opportunity.

• who prepare business plans that are only a couple of pages long with no detail or proper business assumptions

The decision to invest is usually taken after I look the entrepreneur in the eye and assess:

• have unrealistic expectations from their business ideas

Do they have the balls to make it happen, how hungry are they?

• get annoyed when you ask them about their own financial footing or net worth

What is their risk in this, do they have the right amount of skin in the game, not too much and not too little.

• don’t want to give any form of security

• e-mails that are written in phone text slang • who get annoyed because you don’t want to invest Traits entrepreneurs need: • are professional in their approach • spend time explaining in detail what there aims and projects are

+ Stage 4 face to face meeting

At the first meeting, investors have to assume that the technology and the business work. Spending more than a few minutes talking about the mechanics and an interested investor will quickly become a disinterested one. Spell out the amounts and number of investors to whom you are willing to sell equity stakes.

Are they going to be pushing water uphill - is there a clearly identifiable niche in the market that they are targeting, if not and they are a minnow in a sea of sharks the probability is that it will end in tears.

Can I add value and will they consider my input and make a reasoned decision based on their views and mine (neither

• reply to e-mails on time and in a professional manner • who are not afraid to offer personal information about themselves • are prepared to share the pain of going into business” Contacts to investors should: • Demonstrate the professionalism that it will take to run a successful venture • Be personalised, matching the offer to the investor’s profile - they need answer the Win Win question. If the profile

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Interview: Ivor Tiefenbrun High Fidelity, High Integrity “I didn’t plan to go into hi-fi,” says Linn Products’ executive chairman Ivor Tiefenbrun. “But when I got there I didn’t set about copying what had already been done.”

These are the unfettered words of the 60-something business iconoclast and renowned entrepreneur who, in simplest terms, built a ground breaking high-end audio equipment company that changed the global standard.

BUT the path of the eldest child of three, whose mum was born in the Gorbals and whose father arrived as a refugee in 1939 from Austria, was no foregone conclusion.

Like so many individuals built in the entrepreneurial mould, those who see product and service frustration as opportunities to deliver improvement, Ivor’s business journey was born of a moment of frustration.

It was buyer’s remorse some 43 years ago while first married when his purchase of the best hi-fi system available led to both disappointment and his eventual business muse.

INTERVIEW

HNW MAGAZINE JULY/AUG 2012

He considered that what the market had to offer at that time was less involving than it should be; an inadequate product considered top of its class.

“If you think you can do it better, why follow someone else. There’s a personal and individual freedom in creating something better, unexpected and inspiring.”

His love for music, the form and harmony, instrumental and voice, the very unique and very human interaction between art and science, restrained only by the quality of delivery had captured his attention.

And so it began.

He set out to make a sound system that would not be adversely affected by the loudspeakers.

Over and over he carved engineering precision into his turntable, putting to practice the lessons and experience he’d taken from working for his late father’s company, Castle Precision Engineering.

The objective was to enable more musical information to be extracted from the records groove, and in that reprise help millions hear and appreciate what they were unable to before.

It came about when a failure to effectively synchronise different component elements of the assembly line process led to a simple experiment; ask a single employee to build the whole thing.

The result was a circa 20% reduction in assembly time, a Eureka moment for the ages.

From that point on employees were taught how to build Linn products from start to finish, the factory was reconfigured and the single-stage build model was born.

fed to us by newspapers and the TV. It’s largely useless information and daily moaning. There are only a few things in business that I really want to know about. Tell me about manufacturing productivity, employment, the balance of payments and borrowing levels.

With these things you can decide on how to run a business, a constituency or even a country.”

Like the business he built Ivor’s philanthropic interests have both grown and matured by the challenges he has had to face and overcome.

But the effects of this anti-establishment approach grew even further than reduced assembly times and increased product knowledge.

While in his mid-fifties he was diagnosed with Inflammatory Bowel Disease (IBD) – a collective term for Crohn’s Disease and Ulcerative Colitis.

He distinguished himself and his company soon after its inception in 1972, following a brief foray trying to create a mini GM-style manufacturing process, by ensuring that each product was assembled by hand, by a single employee.

The employee work day became more diverse...and more interesting.

“I had boundless energy and never had cause to question my physical health.

Indeed I assumed I was indestructible and so had no apparent limit to my physical stamina.”

You might say Ivor’s company ethos was to reject the modern production assembly line concept for an antiquated single-stage build, and you would be both correct in your observation and ignorant of its efficiency, purpose and impact.

That benefit helped create a happier workforce, many of whose employment tenures are now better measured in decades than years.

Ivor succeeded in more ways than one.

Even Dell pales by comparison to the build complexity of Linn Products’ assembly and testing of components.

And that ethos carries on today.

While Linn operates like most manufacturing businesses, battling the bottlenecks that allow an assembly line to move only as fast as its slowest point, Ivor discovered a simple truth therein with wide-ranging benefits.

“I’m a great believer in human interaction, in people, and you should not treat others in a way you would not want to be treated.”

And as part of the assembly process came a policy not to carry finished goods, avoiding stockpiling and ensuring everything that gets shipped is quite literally “brand new”.

The outspoken, opinionated, fascinating and inspiring founder of Linn Products received an MBE in 1992, followed by the Scottish Entrepreneur of the Year Award in 2001 and was later named Visiting Professor of Mechanical Engineering at Strathclyde University in 2004.

“I don’t need to know most of what’s

When standard medication failed to produce any benefit and his condition continued to deteriorate Ivor sought alternatives to recommended surgery.

His research into IBD revealed as much as 80% of its triggers are environmental, with 20% genetic susceptibility, leading to increased concern about how his own children, active in product development, could be at risk.

This knowledge led him to start an IBD charity called Cure Crohn’s Colitis (C3).

You can help support this initiative by contacting Linn Products directly.

HNW Magazine is delighted to have Ivor Tiefenbrun as key speaker at our forthcoming High-growth Entrepreneurial Action Team (HEAT) initiative in Scotland in September.

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SERIAL ENTREPRENEURS

HNW MAGAZINE JULY/AUG 2012

Serial Entrepreneurs The Darkest Shade of Grey I can’t tell you how many times I’ve been asked the difference between an entrepreneur and a small business start-up.

THEY’RE both new wealth creators, or want to be. both ambitious. And they both create employment opportunities, either for themselves and others or merely by allowing someone else to step into the job they once held.

So what’s the difference? For this pundit it’s simply shades of grey on the ambition and attitude scales; at some point you either move from small business start-up or “lifestyle-business-elect” to entrepreneur or you don’t.

Entrepreneurs take attitude and ambition to exponential levels.

And within the entrepreneurial side of the grey scale there are certainly measures. My view is that there are really three broad types of entrepreneurs, all operating within barely discernable shades of each other.

The first grey segment is the largest.

These are the one-off entrepreneurs.

They start one business. They progress it to a point and then eventually either fail, exit, work until they drop or succession plan and reap the financial benefits over time.

Serial entrepreneurs are next on the pantone scale. They create consecutive businesses, one after the other, to the same progression points as the one-off entrepreneur and just keep going.

The third and perhaps rarest shade is the consummate entrepreneur. These folks represent the atypical understanding of the sector. They are the Branson’s, Brin’s, Jobs’ and Page’s of the modern entrepreneurial era even though they might not all specifically meet the “consummate” criteria. They engage in concurrent ventures then step back from responsibility....to a degree...and

often become business angels for other entrepreneurs.

The problem area arises not with the consummate set, but with serial entrepreneurs, who pose an interesting conundrum; while they are dedicated to each business venture from creation to exit, they are also quite poor at learning from their mistakes as their own overoptimism is both a blessing and a curse.

They say insanity can be defined as doing the same thing over and over again and expecting a different result.

Over-optimism is not far off the insanity grey scale. It’s defined as a tendency to experience positive events and less likely to register the negative ones.

While research studies suggest every shade of entrepreneur is more prone to over-optimism than the general population, like a chemical imbalance, the serial entrepreneur is a difficult beast to teach.

According to an article by Deniz Ucbasaran, Paul Westhead and Mike Wright entitled Why Serial Entrepreneurs Don’t Learn from Failure: Experiencing failure can temper this surplus of optimism among some entrepreneurs—but not serial entrepreneurs.

In a survey of 576 UK–based entrepreneurs in a variety of industries, conducted through questionnaires that covered successes, failures, and attitudes, we found that those who hold multiple businesses simultaneously— we call them portfolio (consummate) entrepreneurs—seem able to adjust their expectations according to experience. If they’ve suffered flops, they’re typically more realistic than novice entrepreneurs.

Because they learn from their setbacks, they may be especially good candidates for investment.

But serial entrepreneurs, who take on one project at a time, are a different breed. Even if some retain specific lessons about what worked and what didn’t, their over-optimism remains undimmed by failure. Others refuse even to look at why things went wrong. “Spending your time thinking about what happened is a ticket to the graveyard,” one told us.

Paradoxically, serial entrepreneurs’ greater propensity to remain overoptimistic may be due in part to the deep pain, even trauma they feel when their projects fail—pain that is especially acute precisely because they involve themselves in only one business at a time.

The shades of grey between one entrepreneurial set and the next are difficult to distinguish, but investors beware, the serial entrepreneur may create impressive returns but could be likened to the darkest shade in the mix.

Experiencing failure can temper this surplus of optimism among some entrepreneursbut not serial entrepreneurs.

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Converge Challenge is proud to sponsor High Net World Magazine’s HEAT Programme.

Since first launching in 2010, Converge Challenge has: Trained 80 research Received 130 applications from nine Scottish universities

entrepreneurs

Helped over 1400 staff and students through seminars and workshops Created 17 new companies

Supported 10 companies into commercial trading

To find out more about this year’s participants and projects, please visit www.hw.ac.uk/convergechallenge

Distinctly Ambitious www.hw.ac.uk/convergechallenge

ECONOMY & INTERNATIONAL

HNW MAGAZINE JULY/AUG 2012

International Focus on...

America Oil & Gas Innovation is “Fracking” Good News

“The folks across the Atlantic have recently gone into supernova mode in the race to overcome overseas oil and gas dependence, a problem dating back to the 1970’s. And that’s going to change the global picture quite dramatically… quite soon.”

The long-stated American objective of energy independence, and perhaps even the ability to supply other parts of the world, is now in process thanks to that uniquely Scottish mindset and backbone of American achievement; innovation, innovation, innovation.

‘Fracking’ Energy Rock fracturing technology or ‘fracking’ has evolved into a game-changing development for the natural gas industry.

While the concept of ‘fracking’ is not new – it’s been around for decades innovations in the technology of rock fracturing to access natural gas (and crude oil) from shale formations has recently moved a long way forward in a very short space of time.

“Historically, the line drawn in the oil producing sands of OPEC nations back in the 1970’s was based on a shift in oil producing power; the US was running out of recoverable natural gas and would soon need to import large amounts of the stuff.”

Four decades on and technology, as in so many other sectors, has helped shift the

balance of power again as estimates of an up to 100-year supply in the US have emerged.

And that revival is happening in the American Heartland, a locale long desperate for an economic boost, and not a short-term one either.

The knock-on effect from the new US energy revolution is lower unemployment levels, higher Government tax revenues.

That and a much-needed boost to the US stockmarket, which has recently posted up a 20% return over the last twelve months, ranking them third globally.

Natural gas prices in the US are a quarter of those in China, and now the lowest in the World. Already US businesses have saved an estimated $83 billion in the last three years in reduced energy costs.

Even the environmentalists can’t complain. Despite increased oil and gas exploration activity CO2 emissions are at their lowest levels in 20 years.

Energy, Ground Zero North Dakota in the Midwestern United States is known for its Badlands, Minuteman ICBM missile silos and the Theodore Roosevelt National Park.

That’s not very exciting turf outside the naturist pursuits, military activity and collectors of Dukes of Hazard memorabilia.

Until now, that is. North Dakota is the new Heartland standout and hub of the shale oil economy, boasting an almost nil unemployment levels (a record .o8% – Source: Job Service North Dakota, Labor Market Information Center, LAUS Unit) amongst its now growing population.

“North Dakota is producing over 600,000 barrels of oil a day. By 2014 that level is expected to rise to over 1,800,000 barrels daily. In that same time the US will be on track to replace its daily supply from Iran.”

It’s a welcome reprieve from a country long-tethered to OPEC’s whims and who now sees the entire balance of power shifting under the surface as the US becomes self-supportive in energy channels.

Particularly when considering the view back in 2008. A mere four years ago the US was on its way to spending $100 billion per year to import liquefied natural gas from West Africa, the Middle East, and even Russia and Australia, adding to the trade deficit and causing economic distress.

Now America is the fastest-growing oil and gas producer in the world and it is likely to remain so for the rest of this decade and into the 2020s.

Innovation, innovation, innovation.

“

North Dakota is producing over 600,000 barrels of oil a day.

By 2014 that level is expected to rise to over 1,800,000 barrels daily. In that same time the US will be on track to replace its daily supply from Iran.

”

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HNW MAGAZINE JULY/AUG 2012

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Business Angel News New SEIS & TSB SMART Grants

NEWS

The Technology Strategy Board has confirmed that grants made under the SMART scheme (proof of concept; prototype development and proof of market) do not affect the amount of investment that an entrepreneur can receive under the new Seed Enterprise Investment Scheme which enables qualifying businesses to access up to ÂŁ150k investment, offering up to 50% tax break to investors.

NEWS

However HMRC warned that the SEIS scheme is subject to de minimis rules under State Aid which provides a cap on the amount that can be received of 200k euros. Entrepreneurs seeking investment under SEIS need to check whether any other grants or support already received have also been provided under the de minimis state aid regulation. In which case this could directly the amount of investment under SEIS that can be received under this scheme.

LBA £500k Syndicate Achieves Sirigen Exit London Business Angel (LBA) and venture capital backed High Sensitivity Fluorescence Business, Sirigen Group Limited, has been acquired by BD (Becton, Dickinson and Company), a leading global medical technology US based company for an undisclosed sum. Founded in 2004, Sirigen uses Nobel-prize winning science to produce light harvesting polymers which have a wide range of applications in research, medical diagnostics and life sciences. BD which has a market capitalisation of $15 billion is focused on improving drug delivery, enhancing the quality and speed of diagnosing infectious diseases and cancers, and advancing research, discovery and production of new drugs and vaccines.

HNW MAGAZINE JULY/AUG 2012

Sirigen is headquartered at Ringwood, Hampshire, UK with offices in San Diego, California and employs 15 staff across these locations. Sirigen has raised circa £10.3 million across four rounds of funding since January 2008 from London Business Angel investors (LBA) and five UK venture capital investors led by Seraphim Capital, the UK’s only Angel led Enterprise Capital Fund. All investors are fully realising their holdings and achieving potential returns in the range of 2.5x – 4.0x on their original investment.

Strong Start to 2012 for LINC Scotland Angels EARLY-stage Scottish companies received £15.5 million of investment in 36 funding deals which involved the LINC Scotland network of business angels in the first half of 2012, up 50% on the £10.3m figure for the opening six months of last year.

The overall investment figure for the first half of 2012 was boosted by four, £1m-plus funding deals. LINC Scotland’s members put up £6.06m of the £15.5m total investment in the first half, having provided £3.64m in 35 deals in the first six months of 2011.

The public sector contribution in the 36 investments involving LINC Scotland members in the first half of 2012, mainly from the Scottish Co-investment Fund, part of the Scottish Enterprise-run Scottish Investment Bank, amounted to £4.3m. Other private sector investors put up £5.13m.

Halo Report: US Angels Steady in Q1 The average amount of capital that angels invested in early stage companies during the first three months of 2012 declined slightly from last year, according to a new report on U.S. angel activity.

The average size of deals involving only angels and angel groups was $940,000 during the first quarter, according to The Halo Report, a snapshot of angel investment trends issued yesterday by the Angel Resource Institute, CB Insights, and Silicon Valley Bank. That represents an 11 percent decline from the average deal size of $1.06 million in 2011.

But the median deal size, which represents the middle number in a numerically sorted data set, amounted to $700,000 during the first quarter— unchanged from the $700,000 median of 2011.

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SPECIAL REPORT

HNW MAGAZINE JULY/AUG 2012

Special Report Bubble, Bubble Tech In Trouble?

THE Menlo Park-based master’s of the investment universe on Silicon Valley’s Sand Hill Road are experiencing déjà vu, as world-changing social media companies find their respective stockmarket floors.

And while not necessarily a return to 2000’s spectacular collapse of the dot. com sector, the reckoning amongst some of the interactive dialogue channels is a real reminder of unrealistic market valuations and manic market sentiment.

Facebook’s initial public offering (IPO) launch value of $100 billion, based on a somewhat ridiculous circa 50 x earnings model, has seen its market capitalisation reduce by half in just 3 three months.

Adding drama to downward movement, Mark Zuckerberg’s company has offered no near-term forecast, even as mobile investments look to put further pressure on earnings. The 28-year-old founder has personally lost over £2 billion in value from his shareholding.

Robin Mehta of Edinburgh’s Union Technology said: “Facebook has been overvalued from the start. This is just the market adjusting itself. The real gamechanger for Facebook and other social media companies will be the perception of the younger generations as to whether they think it’s still ‘cool’ to use. It’s a dangerously fickle audience.”

A plethora of disastrous public market performances has defined the social media sector as all suffer from the same finger-in-the-air valuations, as well as the requirement for very aggressive user acquisition tactics.

Zynga, which relies on social media platform users for almost all of its

revenue, went public in December at $10 billion and has lost approximately 70% of its IPO value. Similarly, Groupon has lost over 60% and Pandora Media is down over 35%.

But it’s not all bad news if we draw a distinction between ‘consumer social media’ and ‘business social media’.

LinkedIn Corp has doubled its share value since its May 2011 IPO. Splunk and Yelp Inc have also performed well, has real estate site Zillow Inc which has doubled its IPO price.

The Facebook Dilemma Despite declining stockmarket value the eight-year-old social media giant continues to grow, ascending to just under one billion active Facebook users at last count (June 2012).

However, analysts foresee early investors running for the doors on 19th August, when they will first be able to sell their shares, likely flooding the market and creating further downward pressure on price.

A questionable mobile strategy is also a huge factor in Facebook’s potential future growth and value.

Unfortunately, recent forays into offering advertising on its mobile platform as users increasingly access Facebook by phone - some 57% - has thus far generated little revenue.

The results sit in stark contrast to capital expenditure in this area which has trebled to just under $500 million in the last quarter alone.

A J.P. Morgan Securities analyst said: “The company is in the early stages of

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SPECIAL REPORT

HNW MAGAZINE JULY/AUG 2012

“

It’s a two-fold problem; the market is being told bond funds are a safe haven, and the people recommending that move are ripping-off clients with high transfer fees of up to 7% or more.

There are real opportunities in equities and yet the market is moving against that.

an important transition in its advertising business that should drive and accelerate growth and margin expansion over time.”

Investor Success According to Silicon Valley, the big winners in the Chat-Tech space are the early-in venture capitalists.

A spokesperson for Euro Pacific Capital said: “The VCs, the private equity guys at the early stages, already cashed out and made their fortunes….Everybody else who ran in to buy the stock at the IPO at a sky-high valuation ended up holding the bag.”

By example, Accel Partners sold 49 million shares of Facebook at $38 apiece repaying enormous profit on their investment. Individuals within Zynga – CEO Mark Pincus and other insiders netted approximately $500 million by selling stock in April - and Groupon have sold large chunks and made fortunes by doing so, while still maintaining strong stakes.

”

Longer-term holders of Facebook, like T. Rowe, Goldman Sachs, Morgan Stanley and Fidelity are weeping in their digital cornflakes, with combined paper losses approaching $1 billion.

Return to Real Value With all that social media noise it would be easy to assume that now is the time to run from shares. But there’s evidence to suggest the opposite may be true, even taking Apple out of the equation.

Alan Steel, Chairman of Alan Steel Asset Management in Linlithgow, said: “The real danger here is the overall loss of investor confidence in equities. We’re seeing net US outflows from equity funds of $175 billion over the last twelve months, and inflows of over $200 billion into bond funds.

“It’s a two-fold problem; the market is being told bond funds are a safe haven, and the people recommending that move are ripping-off clients with high transfer fees of up to 7% or more.

The message about getting in early and getting out early rings clear across the board.

“There are real opportunities in equities and yet the market is moving against that.”

Why? Because no one is really sure, even at this stage, how consumer social media companies are going to make the type of money that can support these enormous valuations once the market euphoria has ebbed.

Mike Williams, President of Genesis Asset Management in New York, agrees saying: “The truth behind the headlines can be very misleading and make people think that because a sector appears to be suffering value loss then the entire market should be avoided.

Even more worrying for the sector-leader Facebook is that approximately 63% of shares available for shorting are currently being shorted. That is quadruple the market average and reflects the company’s apparent deceleration.

“In 2008 earnings for S&P 500 were at $65.39, in 2011 they were over $97.00.

This year we’re on track for $104.00 to $105.00. More importantly, earnings are at all-time record highs.”

According to Silicon Valley, the big winners in the Chat-Tech space are the early-in venture capitalists.

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Bridging the Gap The West of Scotland Loan Fund is a consortium of the 12 west of Scotland local authorities providing loans to new and growing, small and medium size businesses.

Loans up to £50,000 are available to existing businesses trading for more than 2 years, while loans up to £30,000 can be arranged for new or existing businesses trading for a shorter period.

The interest rate is 5%, fixed for the term of the loan. The maximum repayment period is 7 years, although ‘capital holidays’, may be considered. The Fund reserves the right to take security where it is appropriate to protect the investment and security will usually be taken in the form of a floating charge over the assets of the business, standard security or personal guarantee.

Businesses from a range of sectors can apply for funding and the Fund will normally operate in conjunction with other commercial lenders. Applicants must demonstrate that at least 50% of the total funding package is being provided by the private sector.

To date, the Fund has lent over £28m to circa 1500 businesses allowing them to access the gap funding needed and create some 6000 new jobs and generate an additional £250m of sales.

If you would like to find out more about the West of Scotland Loan Fund please visit www.wslf.co.uk

12/09/2012 14:18

PRACTICAL BUSINESS

Practical Business HNW Magazine’s Practical Business section looks at key areas of business needs across legal, accountancy, marketing, finance, leadership, strategy, research and other areas of support. In this issue we look at; the roadmap to entrepreneurship in true infographic style, The FSA’s forthcoming RDR programme we’re calling the “Raw Deal Revealed”, how to increase your leadership productivity, why serial entrepreneurs are the least likely to learn from their mistakes, the truth about tax avoidance, and how to overcome your fear of feedback and make it work for your business.

MARKETING: Conquering Your Fear Of Feedback

LEADERSHIP: TAX AVOIDANCE: Increase Leadership More in the Name of Productivity Morals

Isolated development is an easy way to feel like you’re building your business while learning very little.

Does your productivity ever get hampered by your desire to find the best possible solution?

Tax avoidance does not avoid tax; it avoids liability to tax, which is very very different.

COMPETITIVE ADVANTAGE

HNW MAGAZINE JULY/AUG 2012

The Teenage Millionaire Interview with...

Michael Ward, MD of Harrods Department Store

by Daniel Johnson

WHAT does your average workday consist of?

The working day varies but is largely internal meetings circa 8 per day; external supplier meetings and at least one walk on the shop floor. Monday morning is going through all the previous week’s figures to decide on marketing and promotional activity and any visual displays to product.

How do you deal with increasing competition in your industry?

To compete you have to have very clear brand values and have a real competitive advantage. In each of these an example for us is service we perform 100 guest shops per week to determine the quality of the customer experience and have very clear objectives to increase this satisfaction score and to reduce any complaints.

Do you believe your target market has changed in the past five years?

Our core target market remains constant over medium time horizons.

Do you believe that young people who wish to start a business need to attend university?

I think that the key is how you learn your core skillset. I mentor a number of brands who are technically brilliant but have little commercial knowledge, university does not give a commercial grounding, that is learned in business that is why we are now offering A level students to get a degree but as part of a three year work programme with us.

Did you grow up in an entrepreneurial environment?

No I do not think it is the business environment that shapes you but the social environment.

Do you see a role for IT based products in your industry?

All the future will be knowledge based and IT is at the absolute heart of this, whether that be data capture and analysis or customer communication.

What three pieces of advice would you give to a young entrepreneur starting out today?

1. Always watch cash and not profit.

2. Make sure you have a very strong USP 3. Be prepared to make very large personal sacrifices.

Infographic created by Column Five for Rasmussen College

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There’s no smoke without fire 30 years of classic design meets digital technology

studio. 1190 Argyle Street, Glasgow, G3 8TE tel. 0141 337 3333 fax. 0141 337 3335 email. info@geo-flame.com @geoflamedesign

www.geo-flame.com

ACCOUNTANCY

HNW MAGAZINE JULY/AUG 2012

RDR: A “Raw Deal Revealed” You may have heard about it, read the abbreviation somewhere or even desperately tried to avoid knowing what RDR stands for. Who could blame you?

EVEN saying the phrase out loud offers little by way of further understanding: the “Retail Distribution Review”. Sounds like a supermarket price check survey.

And on the face of it RDR could be easily overlooked as yet another three-letter financial services term destined to inspire mind-numbness and general ennui amongst the masses.

But RDR is more like an unexciting truth eclipsed by a thrilling lie, and could perhaps be more fittingly entitled “Raw Deal Revealed” than the less digestible phrase chosen by the Regulator.

The changes RDR will bring to the retail investment market on 31st December 2012 are all about trying to make things clearer when you invest your money in something, like an ISA, a pension, or a SIPP. So why is it that the Financial Services Authority feels the need to make things clearer?

Now there’s a good question.

This pundit thinks that maybe, when it comes right down to it, what you’re actually being charged to invest your money just isn’t as clear to most folks as it should be.

things like mis-selling, overcharging and outright fraud years ago.

But the baddies out there continue to do it.

What that means is that the fat commissions paid to rogue advisers from SIPPs, who hide them from the view of the investor (that’s you, by the way) are legal. In fact, only the trustees need to be advised that it’s happening.

It could also explain why your pension fund might not be performing as well as it should be.

So just remember, the large print giveth and the small print taketh away.

That’s important because it’s the 60-plus age group that builds up the most capital. And as you get older the eyesight tends to get poorer...which can make you poorer if you don’t remember the above!

The real cost of investing money can be considerable, with initial charges of up to 10% of your investment , 7% more commonly.

And that’s not compulsory, it’s voluntary.

In fact, it’s a bit of a rip-off. And these charging limits are regarded as an industry sector quality standard, along with annual costs and switching charges from one investment to another.

While I’m not suggesting that good advice shouldn’t cost good money, there’s £tens of billions subtracted from UK clients each year that really don’t need to be.

RDR may be an unexciting truth. But its forthcoming changes of policy, driven by the realisation that thrilling lies (like the one about the highest charges described in the small print as “paid for by somebody other than you”) could be just the tonic for more liberal charging practices.

And a bit of clarity for the rest of us.

If at that point we don’t begin to question and check what we’re being charged and the advice we’re being given then we’ve no one to blame but ourselves.

Ed Emerson is Editor of HNW Magazine

RDR was set up to reduce the conflict of interest which can be found in the remuneration for adviser services.

To put that into perspective, most of us when saving for retirement via what’s known as a SIPP don’t really know what we’re being charged. That’s probably why the Serious Fraud Office is so determined just now to get stuck into this often confusing area of saving.

Now in the best of all possible worlds the Regulator would have stamped out

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LEADERSHIP

HNW MAGAZINE JULY/AUG 2012

Practical Business Increase Your Leadership Productivity Does your productivity ever get hampered by your desire to find the best possible solution?

AS you seek the easiest or fastest route to your goal, you may find yourself stopped entirely. Sometimes you may even do this on purpose, to keep from having to make a leadership decision.

However, there’s a work-around. Maybe you’ve heard of the term, “heuristic.”

Heuristics are rules that allow a solution to be found more quickly. With a heuristic, a resolution can be found even when the entire path isn’t clear from the onset.

For example, if there were no roads, but you lived in New York and wanted to make your way to California, a heuristic might be: * Walk west as far as you can * Walk around any obstacle, if possible. * If faced with a mountain range, walk toward the space between 2 small peaks. * Repeat until reaching California.

Does this heuristic give you the most efficient solution? No; however, it will get you where you want to go, and you won’t waste a lot of time trying to make up your mind.

Try these behavioral heuristics to increase your productivity: 1. Choose the right time. Nearly everyone has times of the day when they are most effective and times when they tend to drag. It’s smart to schedule the most critical tasks for your most effective time of the day.

2. Toss it. If a task doesn’t really need to be done, just get rid of it altogether.

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3. Get the bad stuff out of the way. Do the unpleasant items quickly and as early in the day as possible.

4. Set a goal each day (or night). In the morning, decide what you want to accomplish that day. This can be even more effective when planned the night before. Once you have a sense of direction, you can spend all your time getting things done!

5. Eliminate all communication. While you’re working, turn off the phone / cell phone, and don’t check your email.

Hang a sign that says, “Do not disturb,” if necessary. You don’t have to do this for all your tasks, but at least do it during the more difficult items.

6. Batch similar tasks together. Do all your emailing at one time. Make all your phone calls at another. Open your snail mail during a set block of time.

You’ll waste less time by doing your work in this fashion.

7. Set a timer. Even if a task might take hours, starting will seem easier if you simply give yourself 30 minutes to get as much done as you can. A time limit seems to help many people concentrate and work better, too.

8. Set targets. For example, if you have to make cold-calls for your sales job, tell yourself that you’re not getting up for any reason until you’ve made at least 100 calls. Regardless of what happens, refuse to stop until you hit your target.

9. Use the Pareto Principle. This principle states that 20% of the actions you could take will provide you with

80% of the benefits. So focus on the tasks that will accomplish the most.

Unfortunately, these are frequently the tasks that are not enjoyable. You might be surprised how little you really have to do if you focus on the critical 20%.

10. Delegate some of your work. Is there anyone else who can help you? The people around you are resources. Use your leadership skills and designate.

When appropriate, use their time and talents wisely to get things done more quickly.

11. Set a deadline. Having a specific endpoint will really help to focus your time and energy. If a task doesn’t feel necessary, chances are that it won’t get done.

12. Increase your speed. It sounds silly, but this can really help. Try doing everything a little faster. Walk faster, talk faster, type faster, and read faster.

Contributor: Anita Fiander

MARKETING

HNW MAGAZINE JULY/AUG 2012

Marketing: Fear Of Feedback

ONE of the biggest hurdles you face as a new entrepreneur, building an online product, is the ‘fear’ of feedback.

Overcoming that fear can start a learning process that can help your business.

It’s a familiar scenario: you have worked hard at your product, but it isn’t quite ready yet. If you can just grab a couple of more days to fix the obvious bugs, tweak the design, add another social network integration… and days turn to weeks, and weeks into months. You fear the reaction of your friends, mentors and the public. “Is this what you have been working on?!” You want to do better. You know you can do better.

Isolated development: it’s an easy trap to fall into. Your team feel like you are building your business, but yet you are learning virtually nothing that will help.

The learning process is key to your success. Yes, you have a long list of features to develop, but do the users really want those features? Is your core proposition right? Is there enough demand for your product?

Without putting the product in front of users it is impossible to learn the answers to these questions. Anything else is just speculation.

Getting over that fear brings three factors to bear: Immediate feedback and help - You can now show people your work. They will help you. Mentors and friends will

better understand what you are trying to achieve. Support and opportunities will present themselves.

From that point we acquired the power to conquer fear, or at least better understand it.

A surge of productivity – you have to make things better if it’s out there.

Nothing is quite as motivating as other people being able to see your work.

You have something tangible to build on. Iterative improvement will get you there.

Fear in business can take on many faces. It’s not as simple as saying a company fears investment in marketing due to difficult economic times, it may well be as likely that the true fear is that the PR programme or advert in the paper won’t deliver and you’ve lost out in the in investment.

A sense of relief – it’s out there, and now there is nothing you can do about it! You’ve taken the next step on your journey, and it’s exciting.

Fear in General And what is that stops countless people from realizing ultimate professional success? You can blame it on the economy, lack of funding and support, too busy, even the price of petrol.

Regardless how challenging these external issues appear to be, the largest obstacle in everyone’s path is fear – a word that destroys everything from individual dreams to the £multi-billion movements of global stock exchanges.

In fearful situations human instinct suggests we will either flee or fight.

But we as a species took the decision to stand more upright a few millennia ago (let’s forego the evolution vs higher power debate for a moment), and with that standing perspective started to analyze and understand our surroundings without our noses in the dirt.

But that feedback might actually be telling you a few things you don’t want to hear, and a lot of things you need to know to succeed the next time.

Perhaps you haven’t really identified what it is about the product that’s potentially appealing to the market, or the information you’re giving out in the press is only interesting to you because you’re living the business.

Overcoming fear is a lifelong quest.

Understanding that waiting for you on the other side of fear is feedback and the road to results is the goal.

Ask yourself what’s the worst that can happen (Dr Pepper commercials aside) to you if you try and fail.

There are, broadly speaking, two types of people: those who try, stumble and get up and try again and those who don’t risk the skinned knee.

Guess which group is more successful in business and in life?

Contributor: Michael Hayes, Rookie

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The High-Growth Entrepreneurial Action Team

TAX AVOIDANCE

HNW MAGAZINE JULY/AUG 2012

Practical Business: Tax Avoidance, Demanding More in the Name of Morals

by Martin Cook, MC Accounting

EVEN if you seldom took an interest in tax it would have been impossible in recent weeks not to notice the media frenzy surrounding the use of tax avoidance schemes by celebrities and other high profile individuals.

Moral outrage and savage criticism has been the order of the day, much of it presented in very emotive and sensational language.

It does seem extraordinary that individuals acting upon advice and within the law should be singled out in this way.

But not all press comment has been scathing on tax avoidance. The following letter appeared in the Times on 26 July 2012: Sir, It is said commonly that tax evasion is illegal and tax avoidance is legal but immoral. Neither is true. Tax evasion is not itself illegal — no one has ever been charged in a criminal court with tax evasion. It is wrong because it involves illegal conduct, such as signing a false tax return or knowingly concealing a source of taxable income. Tax avoidance does

not avoid tax; it avoids liability to tax, which is very different. The tax avoider pays every penny that the State demands; the tax evader does not.

similar means to reduce their liability to tax it is up to them to amend the legislation to treat such companies as if they were employees subject to PAYE.

If, in the citizen’s eyes, income tax is excessive, he will do whatever he legitimately can to reduce his liability; there is nothing immoral in doing so.

Years ago Learned Hand, the greatest American judge never to have been appointed to the Supreme Court, said: “Over and over again the courts have said that there is nothing sinister in so arranging one’s affairs so as to keep taxes as low as possible. Everybody does so, rich or poor, and all do right; for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is merecant.”

That letter was written and submitted

by Lord Millett of the House of Lords.

Let us have no more cant from those who have been given the power to tax us. If they choose to employ people through service companies, thereby reducing their employees’ liability to tax, it is up to them as employers to refuse such arrangements; and if they want to stop others adopting

Jimmy Carr be damned, the biggest issue here is not about tax avoidance, it’s about Government. In order to stop the tax avoidance process they need first change the rules, rather than vilify celebrities, successful businessmen and even politicians themselves in hopes it will encourage a new tax modus operandi for the masses; all to operate in the so-called “spirit of the law”.

And this issue is far from one of sneakiness or a lack of recognition.

HMRC’s return form has a DOTAS (Disclosure of Tax Avoidance Scheme) at the top of the page. The Regulator registers these schemes.

But the system is complex, rather like a balloon; you squeeze it in one direction and it pushes out of shape in another.

The dividing line here is very black and white; is it legal or is it illegal.

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DIATRIBE

HNW MAGAZINE JULY/AUG 2012

Diatribe: Are You Building Facebook’s Empire Or Your Own? Once upon a time, I believed that all things that were broken with the world could be solved by “social.” I still do, but what we deem as social today isn’t really social.

OR at least, it’s not the crux of it.

The promise of the social web isn’t that it will help us find more people who are like us to connect with - that is merely a lovely bonus. Nor is the promise of the social web that we can collaborate, gather feedback, grow and improve - another bonus. And though I love seeing how people are able to make a living unleashing their creativity on Etsy or YouTube, this isn’t the ultimate promise either.

much like other forms of escape movies, gaming, shopping, addictions and it only temporarily relieves us of our daily pressures.

likes, a Twitter account with thousands of followers and scrambling to figure out how to integrate Instagram, Pinterest and fill-in-the-blank hot social network of the day.

The promise of the social web encompasses, but isn’t limited to connecting, collaborating or creating.

It’s about something much bigger, much more fundamental. And the ultimate promise of social is at risk if we focus on the tools and the outcomes.

In the early days of what was called Web 2.0, the excitement was palpable. Social tools were enabling everyday people to break through traditional barriers to connect, build their audiences and careers and get more creative than ever before. Excited theories of how democratization was going to transform the way we did business were all the rage. From Chris Anderson’s Long Tail to Jeff Howe’s Crowdsourcing, these theories were getting in front of business leaders everywhere. It was no longer merely a Groundswell (Charlene Li), the social web arrived as a bona fide business tool.

What is the promise of the social web? If none of the above is the full realization of the power of the social web, then what is? The answer is actually incredibly simple: It’s supposed to make our lives better.

This was a cause for celebration. New, democratizing technological tools combining with the established, powerful distribution and networks of established business meant that we could go further than ever before.

It’s supposed to make our lives simpler, less confusing, less alienating, more efficient, more meaningful and just plain better. But sometimes it does the opposite.

However, instead of business adopting groundswell thinking, most businesses sought out the tools without the new attitude, seeing them more as a new, cheaper way to get to market rather than a better way to do business altogether.

And don’t make the mistake of thinking that having a dedicated Twitter rep or a popular Facebook page makes you “social.” I’m constantly surprised at the number of organizations who throw their weight behind growing numbers of Facebook likes rather than actually improving the lives of their customers.

This is time and energy spent building Facebook’s empire rather than your own.

Fast forward to today where social means a Facebook page with millions of

Tara Hunt (courtesy HBR)

In fact, I’d say: more often than not, it does the opposite. When it becomes an escape from reality, rather than a positive change in reality, it becomes

This is not even close to the promise that social offers. Business interests and customer interests are pinned against one another.

But providing a service that does this isn’t enough. The access to, the process of and the interaction with that service shouldn’t be complex, confusing, alienating, inefficient and onerous to the customer. It doesn’t matter how amazing that thing is that you provide, someone else can come along and provide that thing with a better process and interaction and eat your lunch. Don’t wait until that moment to improve your approach.

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LINKING ENTREPRENEURS & INVESTORS UK-WIDE

HNW EVENT: HEAT Scotland

HNW EVENT: MIKE WILLIAMS’ VIEW FROM MANHATTAN

HNW EVENT: HEAT London

19th SEPTEMBER 2012

9th – 11th OCTOBER 2012

21st NOVEMBER 2012

THE High-growth Entrepreneurial Action Team

HNW Magazine, in conjunction with Alan Steel Asset Management and Genesis Asset Management in NY, will be hosting a series of small group breakfast, lunch and dinner discussions with CNBC TV commentator and wealth management extraordinaire Mike Williams as he speaks about The Market View from Manhattan, and what that means for the UK and globally.

THE High-growth Entrepreneurial Action Team

In September, HNW will launch HEAT Scotland in Edinburgh with sponsors Adam & Co Bank, HW Corporate Finance, MBM Commercial, Heriot-Watt University, and the University of Strathclyde.

Our individually selected group of 20 Scottish “next-stage” entrepreneurs will be joined by special guest speakers Ivor Tiefenbrun of Linn Products, Stephen Park Brown of The NVT Group, Ray McLennan of Angels Den, Paul Atkinson of Par Equity and Programme Ambassadors Steven Moffat of Huan and Robin Mehta of Union Technology.

The HNW HEAT programme is designed to offer expertise in advising, guiding and funding established next-stage entrepreneurs, and is scheduled to launch and operate in up to 8 cities throughout the UK over the next 24 months.

Contact editorial@hnwscotland. co.uk for further information or to register to attend.

In November, HNW will launch HEAT London in London with a select group of 20 London-based “next-stage” entrepreneurs who will be joined by special guest speakers and sponsors.

The HNW HEAT programme is designed to offer expertise in advising, guiding and funding established next-stage entrepreneurs, and is scheduled to launch and operate in up to 8 cities throughout the UK over the next 24 months.

For further information about getting involved with HEAT London please contact us at editorial@hnwscotland.co.uk

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