HNW Magazine August 2013 Issue

£2.95

LINKING ENTREPRENEURS & INVESTORS UK-WIDE High Net World Magazine August 2013 Issue

INTERNATIONAL HighTech Driving Jobs in America’s Economy ENTREPRENEURS The Top Five Leadership Skills You Need WEALTH MANAGEMENT Britain’s £Trillion Bonkers Bonkers Debt ANGELS A Day In the Life of a Venture Capitalist

BUSINESS STRATEGY: HOW TO COMPETE WITH THE BIG GUYS!

HNW Interviews…

Darren Shirlaw

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

FIRST WORD Any Reason Will Do….

By Alan Steel

Nowadays we’re more joined up, more connected, than a giant beehive. But sometimes it’s hard to really hear anything above the buzz!

You can listen while the news readers rattle and rale everyday about ‘new’ information as to why the markets moved one way or the other, about what’s happened, happening or sure to occur, and then watch as they roll in one ‘expert’ commentator after another to support the view they’re selling.

To me it all just seems a bit silly.

And if you want to know how completely inaccurate the Wall Street ‘experts’ truly are at predicting market turning points, have a look at the Expert Commentators?

Au Contraire! On my Points of Few blog on Tumblr.

The real question is: Why does there have to be a reason for every market movement?

Consider the sharp wee post below by New York-based Joshua Brown, The Reformed Broker, who cites a famed investment market timer named James O. Rohrbach telling it like it really is:

“There is a room on Wall Street that has a big whiteboard. On the left side of the board is a list of reasons why the market went up today. On the right side there is a list of reasons why the market went down today. After the close, the experts go into the room and pick off a reason for what happened.

After all, investors are always looking for the reasons why the market goes up or goes down. Any reason will do.”

So, do we need really to know why rising sales of Hummus and Taramasalata have led to a reduction of fear in Greece and that they’re no longer headed for a ‘Double Dip’ recession?!

What is a good sign is that Bird Flu has hit the BBC headlines again.

Why? Because if they’re that desperate for bad news the markets must be alright!

Look, some people say you couldn’t make this stuff up.

That’s just a theory.

But a famous American major league baseball player named Yogi Berra, who might have been a closet economist himself, said: “In theory there’s no difference between theory and practice. But in practice, there is!”

And in practice, folks, any reason will do.

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Steel’s View P.8

ARE YOU PAYING TOO MUCH FOR POOR INVESTMENT ADVICE? IS YOUR PENSION FUND GROWTH BEING HELD BACK BY EXCESSIVE FEES? HAVE YOU RECENTLY RECEIVED A LETTER INCREASING THESE COSTS YET AGAIN? HAVE A CLOSER LOOK AT HOW MUCH YOU ARE NOW PAYING AND WHAT YOU GET FOR IT, AND THEN COMPARE THOSE NUMBERS WITH THESE:

3% 0.6% 0.0%

The annual growth your investments and pension fund have to achieve each year to simply cover the total annual and switch fees now charged by many wealth managers.(1)

The maximum annual management fee charged by Scotland’s’ largest independent wealth manager – Alan Steel Asset Management.

Practical Business P.32 The fees imposed by Alan Steel Asset Management on all portfolio and pension fund rebalances and fund switches.(2) The percentage of existing Alan Steel Asset Management clients who would recommend Thewealth Basics for our and pension management services to a friend or a family member.(3) Running Your Business The number of times Alan Steel Asset Management have been voted “Best UK independent investment advisers”. This is more than any other Wealth manager in the UK.(4)

01506 842 365

Or visit www.alansteel.com

The no obligation number to call today to find out how to get your investments and family wealth back on to a tax efficient, fair cost and better performing track.

Mike Williams Alan Steel Asset Management is authorised and regulated by the Financial Services Authority registered in Scotland No. 58014 /VAT registration No. 446593714 / Nobel House, Linlithgow, EH49 7HU / Fax: 01506 845074 (1

Assumes annual charge of 1% and 2 x 6 monthly portfolio rebalances at cost of 1%. (2) Source: ASAM (3) Source: Moneymarketing magazine. (4)Source: ASAM.

CONTENTS

Steel’s View P.8

GDP - Gross Distortion Predictions First Word

Any Reason Will Do!

P3

Emerson A Squirrely Armageddon

P7

Alan Steel Bonkers Bonkers Land

P8

Mike Williams Maybe Modest Is Good

P11

Distribution Partners HNW’s Partners & Supporters

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Feature Investing

P17

Feature Crowdfunding

P20

WAW What Angels Want

P22

WEN What Entrepreneurs Need

P23

International High Tech Driving US Jobs

P25

HNW Interviews Darren Shirlaw

P26

Main Feature Business Strategy

P29

Diatribe The Tails of Progress

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Mike Williams P.5

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EDITOR

A Squirrely Armageddon

By Emerson

Was the NASDAQ’s three-hour shutdown this month – that drove traders nuts and investors into panic mode – a stark reminder of how fragile the markets are, or just a squirrel’s last trapeze act on a power line?

Probably a bit of both.

Luckily it happened in the lethargic trading period of August, as the temporary market paralysis that caught everyone by surprise had pretty much run its course by the time investors and money managers actually became aware of it.

That confusion was best summed up by a CNBC commentator who noted that the shutdown was affecting “millions or thousands of people.”

Hey, wasn’t it about this time last August that a different kind of fast moving animal – lighting quick high-frequency trading (HFTs) – was blamed for invading the power lines and causing something of a waterfall decline?

Hmmmmm…….maybe the squirrels and the HFTs are in cahoots. After all those cheeky vermin have twice before taken down the NASDAQ back 87’ and 94’.

No blured lines there then.

But maybe there’s a bigger lesson here.

Consider Warren Buffett’s perspective on the daily, weekly and monthly market hiccups.

The Oracle of Omaha has long suggested ‘investors should have a portfolio where they would feel comfortable if the market shut down for five years; if you couldn’t sit tight with a piece of the broad market shut down for a few hours, you’re either a trader or you have the wrong portfolio.’

If there’s a lesson here it’s simply this: If you’re pinning your invested future on the ebbs and flows of a three hour trading window – it was down from12:14 p.m. ET until activity fully resumed at 3:30 – then that’s about as safe a bet as playing on power lines.

In fact, it’s completely nuts.

P.7

STEEL’S VIEW

Bonkers Bonkers Land

By Alan Steel

So what’s wrong with MEP Godfrey Bloom having a bash at bongos? Jings, you could sometimes find that kind of drum in slide guitarist extraordinaire Ry Cooder’s backing band. He tried all types of percussion.

Not sure if he and Godfrey ever jammed though.

But what about the Government spending issue he’s opened up?

On that particular number I think Mr Godfrey is Blooming right….although he’s probably a drum short of the full kit.

You see, the Government has managed to run up a £Trillion debt. That’s a lot of money, mismanaged over a long period of time by a lot of folks who clearly don’t really know what they’re doing.

It’s less like bongo bongos and more like Bonkers Bonkers.

The situation reminds me of having a bit of a sore back, and how mine got pretty bad over the last few years.

P.8

I’d done the usual, been along to the recommended advisers; the GP, the other medical offices, sat through the tests and watched one by one as the sagely nodding medical professionals took my blood and gave me little in return.

By the age of 66 my blooming back pain had been written off as arthritis, labelled as a non-fixable condition and I was told I’d just have to play along with the discomfort and sleepless nights.

But as luck would have it I ran into an old pal, once a pauper now a billionaire, who said he knew of a ‘back magician’ on Harley Street in London.

That’s a nice street by any reckoning, and despite the snide comments from the local medical contingent - they said I was about to get ripped off by an overpriced quack - I rated my pal’s suggestion higher than the consensus diagnosis. So I went with it.

There’s a good lesson here, in life and investment; when everyone’s moving in one direction, go the other way!

Bonkers (cont…)

Within 10 minutes of arriving at Harley Street the doctor had concluded my back was actually the result of a fall from a tree I’d taken at the age of 12.

Five sessions later, and at a cost of less than £450, I’m well on my way to being cured.

Think of it like this, when it comes to financial health the mistakes we made 50 years ago don’t seem to cause any real immediate pain. But the damage done over 30, 40, or 50 years…that deferred pain that you never found a specialist to help you fix…is gonna hurt a lot!

And in some cases you won’t be able to fix it, the pain of poverty, of getting ripped off.

Well here’s the advice we’ve been given by an Environmental Minister on how to fix Britain’s financial pain: When our toasters break we’re to have them repaired, not replaced.

Come again?!

Yup, in order to fix the £Trillion overspend we should find a toaster repair person instead of buying a new one.

(Anyone know a toaster repair person nowadays?!)

Uh, Minister? What about the extra cash for the repair bill when the Government keeps the deposit interest rates so low?

To me it sounds like that fella is a few slices short of a loaf!

It’s all about the advice you get, and how focused you are on either trying to make it better, or accepting what you’re being told.

That, and we all should seek a second opinion, a specialist who can tell us what’s really wrong, and maybe install some ‘new equipment’ in Government to help us leave Bonkers Bonkersville far behind.

But what about the tale of Mr Bloom back here in Bonkersville UK?

P.S. Oh, and if anyone wants the name of that Doctor in London, let me know!

P.9

VIEW FROM MANHATTAN

Maybe Modest Is Good

By Mike Williams

The markets continue to chop a bit even as the trend remains up, frustrating many in both the bull and bear camps.

We've often covered in these notes that the public has simply lost faith in the equities world, convinced it's rigged, and instead have bought into the slew of offerings in newly-minted "financial tools".

Once again the Wall Street marketing process is working wonders. The newfangled ETF's, hedge tools, shorting mechanisms are all the rage.....for everyone but those using them.

Hey, it's tough when the market is basically just going up. It's tough for those looking for "hedge" and those looking to get out of their bonds and into "corrections" in stocks.

As has been the case throughout history, saying one will be ready to buy the next dip (like when the Dow stands at 15,518) and then actually buying that dip after 1000 points have been shaved is a hugely different story for most.

The games continue.

And, yes, it would be nice to see 1000 points shaved.

The more I listen to others, the louder the chants get for a summer swoon, hinting to me that IF we get one, it will be far more shallow than many expect, accomplishing little except to build more tension.

Record Highs AND Insider Buying?

Are you kidding me? Is that another knife in the heart for those of us hoping for a corrective wave?

The idea of a summer swoon is getting pretty bleak. In fact, we may already have seen it.

Darn it all.

If we knock China out of the equation, trade data from around the globe is slowly improving even as the latest media headlines speak of "tapering". Note (even as things improve) we have gone from "fiscal cliff" to "QE" to "taper" as the most searched financial terms....all in a matter of months.

Talk about global lemmings!

Meanwhile, back at the ranch, the landscape (mostly for the larger economies) appears to be stabilizing.

Dr. Ed Yardeni and his team help to provide a few very compelling insights as the media scare tactics continue to run amok: â—? In the US, the average of the M-PMI and NM-PMI jumped from 51.5 in June to 55.7 in July, the best reading since April 2011. The averages for the Production indexes and the New Orders indexes were especially strong.

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HEAT 100 VIEW FROM MANHATTAN

The HNW HEAT Scotland 100 High Growth Company Publication & Event Series Modest (cont…) ● In the UK, the story is remarkably similar to the one in the US. The average of the two PMIs soared to 57.4 in July, the highest since January 2004. Also shooting up during July was the UK's Economic Sentiment Indicator to 104.2, the highest reading since March 2011.

Overall, global economic growth accelerated to a 16month high in July, according to the JPMorgan Global Manufacturing & Services PMI, which rose to 54.1 from 51.2 in June.

● In the Euro zone, the average PMI rose from 48.5 in June 50.0 in2013 July, after 22 months below 50.0. st May Tuesday 21to That's actually surprisingly good given that the euro zone has been in a recession for the past six quarters. The rebound has been widespread across the countries in the region and in the averages of their two major industry categories.

There has been a great deal of criticism about the quality and accuracy of China's official economic data, especially trade statistics.

In Japan, the average PMI was surprisingly weak, ticking down from 52.2 in June to just 50.7 in July. This is one of the few indicators suggesting that 'Abeconomics' isn't working as well as expected to boost economic growth in Japan. It's also demographics. ● In the emerging economies, the PMIs are mostly on the weak side. China's average PMI was barely changed at 52.2 in July from 52.0 in June. Brazil's M-PMI fell to a 13-month low of 48.5, down from 50.4 in June. It is the first deterioration in this measure since September of last year. Brazil's NMPMI also contracted to an 11-month low, falling to 49.6 from 51.1 the previous month. India's NMP.12

And What About China?

The good news is that Yardeni Research is on the case and found a way to double-check: It seems one way around the problem is to monitor the value of exports to China compiled by the countries of origin.

The results aren't pretty.

Data through May shows that dollar-denominated exports (on a 12-month sum basis) to China from the US, the euro zone plus the UK, Japan, and South Korea have been mostly flat to down in recent months.

All together, they were down 4.9% year-on-year through May. I am shocked.

Yes, shocked that the media and Chinese government have not been telling us the truth all these months.

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P.15

FEATURE: INVESTING Investment reliefs - SEIS provides investors with:

50% Income Tax relief on their investment in qualifying companies.

In simple terms, if you invest £100,000, you will get £50,000 of income tax relief back from HMRC. Note – you have to have paid at least this much income tax to be repaid it.

Equity Investing: Risky Business or Risk Relief

By Neil Norman Everyone understands that equity investment can be risky. But at the same time, there are tax reliefs available that can mitigate – or even eliminate – the risk of losing your money.

We’ll walk through the lucrative tax reliefs that might be available for investors who make equity investments into companies.

Seed Enterprise Investment Scheme (SEIS) SEIS has been described as “the world’s most generous scheme for investors”. It is a relatively new UK government initiative, for investment into new and small companies, following on from the long established EIS tax relief scheme (more on that below).

28% Capital Gains Tax reinvestment relief is also available.

Again, in simple terms, by investing the same £100,000, you will also save £28,000 of capital gains tax if you were due to pay this on, say, the sale of a second home.

Note – this is only available for investments made during the 2013/14 tax year that have been treated as made in the 2012/13 tax year – thereafter, only half of a £100,000 gain is exempt

No Capital Gains Tax on a profitable sale of the shares after at least 3 years, or further Income Tax relief if the company fails.

SEIS Relief: An Example

In a nutshell, this scheme is designed to motivate investors to invest for shares in new companies.

● Invest £100K in an SEIS-qualifying company = £100,000

The government mitigates investors’ financial risks by providing lucrative tax reliefs. In fact, these reliefs are so generous that, for the right investor, the financial risk can be eliminated altogether.

● Income Tax relief (elect to treat as 2012/13) = (£50,000)

The qualifying requirements for the company and the investor can be complex, but let’s focus on the benefits.

● CGT exemption (on £100K gain) = (£28,000) ● Cost of Investment = £22,000 ● Sell for a gain after 3 years – keep the profit taxfree!

But if the company fails (say, next year):● Income Tax relief (2014/15) = (£22,500) (£100,000 invested – £50,000 SEIS) 45% tax rate ● Total Cost / (Profit) of Investment = £500 ● Yes – a profit of £500!! Or, to put it another way – 100.5% tax relief!!

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FEATURE: INVESTING

What Angels Want & Entrepreneurs Need….

Equity Investing (cont…)

By Neil Norman, Chiene + Tait Investment limits A company’s SEIS investment limit is £150,000 less any de minimis state aid it has received in the last 3 years. Once the company has spent at least 70% of SEIS funds received, it can accept further EIS funds.

be repaid it; and Capital Gains Tax deferral relief is also available.

Again, in simple terms, if you invest the same £100,000, you will also defer paying £28,000 of capital gains tax until you sell the shares (or can reinvest at that point and ‘redefer’ the original gain).

An individual’s SEIS investment limit is £100,000.

Also, No Capital Gains Tax on a profitable sale of the shares after at least 3 years; or further Income Tax relief if the company fails.

Enterprise Investment Scheme (EIS)

EIS Relief: An Example

EIS has been established as the most common means of investment for investors for many years. This scheme is also designed to motivate investors to invest for shares.

● Invest £100K in an EIS-qualifying company = £100,000 ● Income Tax relief (2012/13) = (£30,000)

However, the advent of SEIS means that EIS is more commonly used for larger investments in slightly older and/or larger companies and/or ‘follow-on’ investments into companies which have already received SEIS funding.

● Cost of Investment = £70,000 ● Sell for a gain – keep the profit tax-free!

But if the company fails (say, next year):-

The reliefs are certainly attractive, but not as lucrative as those on offer to SEIS investors.

● Income Tax relief (2014/15) = (£31,500) (£100,000 invested – £30,000 EIS) 45% tax rate

Investment reliefs - EIS provides investors with: ● Total Cost / (Profit) of Investment = £38,500

30% Income Tax relief on their investment in qualifying companies.

Investment limits

In simple terms, if you invest £100,000, you will get £30,000 of income tax relief back from HMRC. Note – you have to have paid at least this much income tax to

A company’s EIS investment limit is £5,000,000 in any tax year and an individual’s EIS investment limit is £1,000,000.

● OK – no profit. But the loss is restricted to 38.5% of original investment!

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HEAT 100 FEATURE: CROWDFUNDING obstacles. Reward-based crowdfunding – real crowdfunding – is different.

Real Crowdfunding

The HNW HEAT Scotland It lets people give money to entrepreneurs or creative projects in exchange for personalised rewards, which could be anything from thank you cards to bespoke 100 High Growth Company products.

Publication & Event Series

What Angels Want & Tuesday 21st May 2013

Entrepreneurs Need….

The Crowd Basics

By Amanda Boyle, Bloom VC

Crowdfunding has become a mot du jour in the media and entrepreneurial circles.

However, the use of crowdfunding as an umbrella term has led to confusion around what it actually is. This largely arises from the many forms it can take.

Funders may part with their cash in return for equity, strong interest rates or the knowledge that they are supporting a growing business.

Three Crowds The three main areas of crowdfunding are peer-to-peer lending, equity-based platforms and reward-based models.

The first connects lenders with small businesses, giving SMEs desperately needed cash and investors’ high rates of return. Equity models allow the crowd to invest relatively small amounts of money into a new business for a stake in the company.

In essence, crowdfunding harnesses the collective financial strength of the crowd, individuals and communities with shared interests, allowing them to support people, projects and businesses.

Many of these platforms act as additions to the banking marketplace, using the internet to overcome traditional P.20

It harnesses the founding principles of crowdfunding – using theSPEAKERS internet to Ray McLennan, Angels Den connect entrepreneurs with Stephen Paterson, Haines Watts those willing to share Carlos Alba,based Carlos Alba financial support onMedia Ed Emerson, Magazine nothing more than HNW curiosity and altruism.

And it’s not just about the money - the benefits of a supportive crowd go way beyond pounds, dollars and euros.

Real crowdfunding is just as much about forging connections and building initial support. You can prove a concept and demonstrate market appetite for your product or service.

You can pre-sell that product or service and fill your order book. You can use crowdfunding for PR purposes and to build your fledgling brand.

Ultimately, you create a community of ambassadors, people who are so keen to buy your product or service that they’re paying you to start your business – and that’s incredibly powerful.

As a result, it is reward based crowdfunding which has the most to offer new, pre-revenue businesses, desperate to turn their great idea into a reality.

Raising small amounts of money to build a prototype, buy a vital piece of equipment, or pay for materials can be the catalyst that thwarts failure and starts a wildly successful, profitable business.

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HEAT 100 WHAT ANGELS WANT

A Day In The Life Of A Venture Capitalist

By Fred Wilson, AVC

What Angels Want & People ask me what a day in the life of a VC is like.

Tuesday 21stisMay 2013But they can be a grind. Take Each one different.

Entrepreneurs Need…. yesterday for example.

I started yesterday at 8am with a breakfast meeting. I ended around 8:15pm, when I wrapped up a pitch meeting in my office. In between those two meetings I did ten other meetings for a total of twelve meetings in a bit more than twelve hours.

Of those twelve meetings, one was a three hour board meeting, one was a breakfast meeting with another venture investor, one was a lunch meeting to talk about CS Ed in NYC, four were pitch meetings, one was an interview with a journalist about the future of VC, one was a call to discuss board subcommittee work, one was a meeting with regulatory consultants for bitcoin and other payments systems, one was a negotiation on the windup of a seventeen year old VC transaction, and one was a visit to my dermatologist for a regular checkup.

In the middle of all that http://avc.com went down due to an apache config issue somewhere and I was debugging it via email and kik. I think I’ve got a temporary fix working and now I need to find out what the culprit is and get it fixed.

P.22

Before starting my day yesterday, I got up at 5am and read, blogged, and did email for 2 hours and 45 minutes.

Depending on your perspective, my day yesterday will either seem stimulating or exhausting. It is both. I love my job. I get to meet amazing people and learn about awesome things every day. But the cost of that is meeting marathons where you have to be alert, active, and on your game in every one.

My goal is to give every entrepreneur as good of a meeting as I possibly can.

A second goal is to give as many entrepreneurs as possible an opportunity to meet with me and pitch me if they want to do that. It requires a lot. And that can be a grind.

The goal of this post is not to complain or whine. I hope it doesn’t come across that way. The goal, as always, is to “open the kimono”.

To give you a hint of the mindset of the person you are going to meet with today (or someday) and understand what their day is like and how they are coming into the meeting.

Do us all a favor and give us a good meeting too. It helps. A lot.

WHAT ENTREPRENEURS NEED Paul’s point is all about being upfront and honest, which is ironic, because Demo Days seem to be one giant dog and pony show where the flashiest, biggest talking companies seem to get the most attention.

Still, I think he’s right about this point. Just tell me, as an investor, what’s going on, in plain and simple language.

Tell me what you’ve figured out and what you haven’t.

Be honest about where you are in your round. Only the following things can happen:

Relationship Building with Investors

By Charlie O’Donnell, This Is Going To Be Big There’s been a lot of innovation in the startup fundraising world in the last couple of years– Angellist, Second Market, accelerators, etc. One thing you can’t innovate around, however, is building a human relationship.

That’s why I really liked two posts on the topic of investor/founder relations that I read this weekend.

From Paul Graham: “The way to seem most formidable as an inexperienced founder is to stick to the truth. How formidable you seem isn’t a constant. It varies depending on what you’re saying. Most people can seem confident when they’re saying “one plus one is two,” because they know it’s true…

“If you’re not a master of negotiation (and perhaps even if you are) the best solution is to tackle the problem head-on, and to explain why investors have turned you down and why they’re mistaken. If you know you’re on the right track, then you also know why investors were wrong to reject you.

Experienced investors are well aware that the best ideas are also the scariest.

“They all know about the VCs who rejected Google. If instead of seeming evasive and ashamed about having been turned down (and thereby implicitly agreeing with the verdict) you talk candidly about what scared investors about you, you’ll seem more confident, which they like, and you’ll probably also do a better job of presenting that aspect of your startup. At the very least, that worry will now be out in the open instead of being a gotcha left to be discovered by the investors you’re currently talking to, who will be proud of and thus attached to their discovery.”

a) I’m cool with the truth. That’s the best scenario… I go into this investment eyes wide open, we work on the issues together, and if it doesn’t work, I’ve got no one to blame but myself. b) I’m not cool with the truth and I don’t want to invest.

You have one less investor who didn’t see the same vision you did bothering you with distracting e-mails and discussions about strategies you don’t agree with.

Whereas, if you pull one over on me and then things aren’t as they seem once I’m in, I’m going to lose all faith in you as a person, let alone a founder, because you weren’t honest. I won’t support you in the future and won’t put my full effort in as an investor.

Instead, I’ll likely be trying to find ways to cut my losses.

That’s why it’s so important for investors and entrepreneurs to spend time getting to know each other.

I had someone pitch me recently who started their email out with an indication of how fast the round was going.

I asked if they were optimizing for bringing on people they want to work with or for speed to close–because I wouldn’t be interested in a founder that was looking for the latter.

Hunter Walk’s post on demo days really does a good job of summarizing how I feel about this: “…I’m hoping we can see how each other work, maybe even work together by hopping off a whiteboard to talk through a design issue, product strategy or distribution hack you’ve been struggling to solve. I’m more interested in the way you think, communicate and lead, than your Keynote pitch skills. A termsheet should be just another milestone within a long relationship.”

The goal isn’t to get the best first round valuation–it’s to gather all the folks you need to built a successful company over time.

Strong relationships built off honesty accomplish this.

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of millions of their own risk capital, on average levering three times more from other sources.

Just as importantly they have invested their own skills and experience in the next generation of SMEs. The companies supported have created thousands of high quality jobs in the Scottish economy.

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INTERNATIONAL High-tech firm births were 69 percent higher in 2011 than in 1980, and drilling down within high-tech to isolate just the ICT sector, new firm births grew by 210 percent.

High Tech Driving US Jobs

By Kauffman Foundation

What Angels Want & High-tech startups are a key driver of job creation throughout the United States, according to research released by technology policy coalition Engine and the Ewing Marion Kauffman Foundation.

Entrepreneurs Need….

Though they start lean, new high-tech companies grow rapidly in the early years, adding thousands of jobs along the way.

In fact, high-tech startup job creation is so robust that it more than makes up for the job destruction from earlystage businesses failures – a key distinction from the private sector as a whole where job losses from earlystage failures turns this group into net job destroyers.

Previous Kauffman research has shown that new and young firms are responsible for net job creation, not small businesses in general.

This report contrasts business and job creation dynamics in the entire U.S. private sector with the innovative high-tech sector – defined here as the group of industries with very high shares of employees in the STEM fields of science, technology, engineering and math.

These differences are highlighted at the national level, as well as detailing regions throughout the country where high-tech startups are being formed each year.

“Not all entrepreneurs are the same. In fact, the majority don’t even set out to innovate or grow their businesses, and many more never do,” said Ian Hathaway, an economic advisor to Engine and author of the report. “By comparing the high-tech sector with other firms across the economy, we see the job-creating power that growth-oriented technology startups harness, compared with other young businesses. Observing these trends, it is clear that encouraging the creation of new tech businesses can boost our economy.”

At the same time, private-sector business creation was down 9 percent.

The report also finds that high-tech startups are springing up at a higher rate than all private-sector businesses. Relative to their share of firms in the economy, high tech is 23 percent more likely, and ICT as a segment of high tech is 48 percent more likely, than the private sector as a whole to witness a new business formation.

“This report confirms the dynamism of the technology sector and its disproportionate contributions to the U.S. economy. It also underscores the need for policies that enable and support that dynamism,” said Dane Stangler, director of Research and Policy at the Kauffman Foundation.

What’s more, these high-tech startups are becoming increasingly geographically diverse, while the opposite is true for new businesses across the economy generally.

Top 10 Metro Areas for High-Tech Startup Density: 1. Boulder, Colorado 2. Fort Collins-Loveland, Colorado 3. San Jose-Sunnyvale-Santa Clara, California 4. Cambridge-Newton-Framingham, Massachusetts 5. Seattle, Washington 6. Denver, Colo.rado 7. San Francisco, California 8. Washington-Arlington-Alexandria, DC-Va.-Md. 9. Colorado Springs, Colorado 10. Cheyenne, Wyoming “In the case of Boulder, a startup community whose evolution I’ve observed and participated in closely over the past many years, the cultural and economic transformation has been extraordinary,” said Brad Feld, co-founder of Boulder, Colo.’s Foundry Group and author of numerous books about creating startups and startup communities. “While there isn’t one, definitive blueprint to building a technology industry, this research can hopefully inspire communities and policymakers to work together to ensure that the spread of high-tech entrepreneurship isn’t just a trend, but a long-term phenomenon.”

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HEAT 100 INTERVIEW

Darren Shirlaw Founder Shirlaws and Navitas Ltd

What Angels Want &

BIO: Darren Shirlaw began his career in the funds management industry. In 1999 he launched Shirlaws, one of the fastest growing international business coaching organisations.

Originally established in Australia, Shirlaws now also operates in the UK, USA and New Zealand, with more than 100 coaches working mainly with mid-tier clients, typically 20 to 1,000 employees.

Tuesday 21st May 2013

Entrepreneurs Need….

Increasing Profitability While Managing Growth

By Emerson

“It took four years to design Shirlaws’ IP. I’d interviewed 700 leaders along the way as to why they went into business and what they struggled with. I combed through every detail, riveting together the thousands of hours of experience and discussion into an airtight vessel. And just before we launched I brought five other guys together for a weekend, in a room, to challenge every assumption and conclusion. When Monday came, the plan was clear; take it global.”

New York is a tough business environment. They don’t suffer fools there, they eat them. And rightly or wrongly, once experienced, that frenetic model of business Darwinism follows you through every subsequent encounter.

As a New Yorker, I beg a moment’s empathy of my first encounter with a Shirlaws acolyte in Edinburgh’s infamous eatery-drinkery Indigo Yard, prerefurbishment, who spoke to me of feelings and attitudes and then, from a briefcase, withdrew a pack of coloured marker pens and began to scribble.

My gut reaction at the time; reach for the steak sauce and a bib. This one could be filling.

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They say love is blind...and that marriage is the eye opener. The simple reality is that I became betrothed to a single idea that day; that there are in fact structures you can follow to increase profitability while managing growth.

Strong stuff, that, and delivered steadily by Shirlaws’ practitioners now since the organisation’s arrival in 1999.

So, when the opportunity arose to speak with Darren Shirlaw himself, the eponymous founder of the international business coaching company, I easily opted for a pen instead of a knife and fork.

Perhaps the business environment in Australia bears some fierce resemblance to the Big Apple.

The daunting task of globalising the business saw the former fund manager – retail equities – create one of the country’s fastest growing companies and thereafter break through the internationalisation barrier at heady speed, setting up successful operations in the UK, USA and New Zealand.

“I left the fund management world at the age of 32,” says Darren. “What I experienced were people getting paid extraordinary amounts of money, but equally working 361 days per year and exploring their third divorce.

I didn’t want to end up like that so I decided to take the knowledge of growing the value of a business from that space into this space. The plan was ultimately to one day set up my own fund.

INTERVIEW

What Angels Want & Entrepreneurs Need….

“The whole coaching arena we thought would be a big market. Sure enough 3 years after we started we were the fastest growing company in Australia and we were headed overseas by 1st July 2003.”

costs out. What that means to most is that you should focus on those employed to make revenue and those employed to administrate.

You launched during the Dot.com collapse. No suddenly remorseful thoughts of backing off until the storm settled?

“But I look for a third tool; those building resources for the future. In my fund manager days the companies which were managed in this way, with the third element, were the types I would have liked to buy.

“I think entrepreneurs are a certain species. They have it in their blood to want to do it for themselves,” says Darren. “They are idea driven, profile as high risk takers and eventually the corporate environment causes strangulation. I was ready and that was that.”

“Without that third element it’s hard to see future growth. So in the early days I would draw three boxes for the three resource tools and explain that you need to take enough out of the revenue box to invest in future growth.”

What about the difficulties of internationalising?

What’s the expression: An expert is often anyone from out of town?!

That brings future profit and increased value at sale.

“Yeah, sure! Imagine the reception that some fella from Fiji would get coming down to the UK and telling everyone ‘Hey, I’ve figured out how to run a business.’

It was a bit like that. A tough trail to blaze. The breakthrough moment in the UK came after a coaching stint with a very high profile CEO who was trying to sell a massive business holding. That person stood up at an event and told the audience he could not have succeeded in that process had it not been for my assistance. That’s when the phone started to ring.”

I have to ask. What about the coloured pens approach?

“That’s an easy one,” says Darren. “Over four years I tried to find a way to teach people that there are three resource tools in your company, not just two. What most people understand is the P&L; revenue in and

“The coloured pens happened during one of those early client meetings on a whiteboard. There happened to be a pack on the table. I picked them up and used ‘red’ for infrastructure, ‘blue’ for profit, ‘black’ for future growth, and so on. It became our brand. Years later on a plane I started doodling on a pad with the coloured pens and the woman next to me said ‘you must be from Shirlaws.

“That’s when you know!”

Shirlaws now operates in 11 countries, has over 3,000 relationships and 620 plus active clients – mainly SME businesses with between 20 and 1,000 employees in the £1million to £30million revenue range – having built the client base for over 14 years.

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BUSINESS STRATEGY

What Angels Want & Entrepreneurs Need….

The Top 5 Leadership Skills You Need to Succeed

By Jill Tyndale, Up and Running

What makes a leader successful? Great leaders have a certain quality about them.

These qualities of leadership inspire confidence and hard work.

It simultaneously instills a “we’re all in this together” kind of camaraderie and a faith that someone is, indeed, steering everything in the right direction. It is leadership, and it’s not as innate, as unachievable, as you might think. Rather, it’s a quality you can learn to project. And here are the top 5 attributes: 1. Believe in yourself and your team without ego Don’t be an egomaniac; be confident. When you stand behind the product or service your company is offering and know that it’s good, you project a calming and inspiring image to everyone around you.

Clients and employees especially want to believe in you, but they won’t if you don’t have faith in yourself.

Believe, too, that your team has your back; you aren’t alone in this.

2. Don’t do anything that humiliates you You may not always be thrilled with the hard work and long days involved with getting a company off the ground, but that doesn’t mean you should feel troubled by it.

You are running the show.

If you don’t like the way a client does business, walk away. If you feel taken advantage of, end the relationship cordially and move on to better things.

It’s your job to take care of yourself and your employees.

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BUSINESS STRATEGY

3. Draw lines, be firm, and set precedence

4. Don’t spread yourself too thin

Taking on work that isn’t financially feasible (i.e., working for less than you’re worth or working harder than you’re being paid to) will never get your company off the ground.

You’re eager and that’s great, but you can’t do everything yourself. Hire and partner with the best people; trust and empower your people.

Be firm about your bottom line and stand behind it.

You aren’t in business to go bankrupt or foster abusive relationships. If you allow a client to make unreasonable demands at ungodly hours of the night, if you allow employees to walk all over you and spread negativity, the trends will continue.

Draw your lines early and build your company on a solid foundation.

No one will benefit from you burning out because you tried to do it all yourself.

5. Learn Today is something you’ve never done before. Learn from it and don’t be too hard on yourself or your employees.

Learn under fire; learn from your mistakes and successes. Learn to listen.

Clients don’t want to be talked over, and employees want their concerns heard.

Learn how to get the most from the people vital to your organizations success.

Wherever and whenever you get your inspiration, P.31

HEAT 100 BUSINESS STRATEGY

The Success Bias

By Mark Suster

In the end it’s easy to look back triumphantly at our startup experiences and define every move as heroic.

We of course remember the positive outcomes, the rewards, the press celebrations at key moments or at the finish line. We of course get all of the accolades if at the tape there was a financial pay day.

And with so many acqui-hires (acquisition hires) these days you never really know who was financially successful and who was safely landing a plane with no engines.

It’s certainly nice to look at your past accomplishments in your bio.

Yet these only tell the stories from one side of the startup ledger. They are whitewashed falsehoods that mask the struggles. They are only one aspect of the startup experience.

Avoid the stupid mistakes I made: ● raising too much money too quickly ● building too many features (a mile wide & an inch deep) ● getting too much press before we were ready ● focusing on M&A to fix our problems ● believing our own hype Most of the days at a startup are a grind. While you’re in the moment it feels like there are as many failures as their are successes.

Even success feels hollow. I had a friend who was on the front page of the business section of one of the top newspapers in the country while his company was 30 days from running out of cash. And in all seriousness the article prompted his relative to hit him up for money.

Every first-time entrepreneur who has raised millions in VC will know the surrealism of people calling you a millionaire while you are figuring out whether you can really afford to pay for a vacation since your credit card is already a little bit bruised.

We put on our brave faces and turn up everyday hoping that in the end we won’t feel like frauds.

Even along the journey and nowhere near the destination I see many startups with their chests pumped out touting their latest deals, showing off their swish offices funded by millions of venture funding (and not necessarily yet the commensurate business success to afford said offices or perks).

It’s not that you don’t believe in your ultimate outcome – you have to believe in order to be insane enough to continue the journey against all odds – it’s just that there is nagging self doubt.

I understand the temptation. In a world with too much tech hype many teams feel the need to constantly spin.

There are of course also external factors you can’t control. You think investors will continue to finance you – they promised they would – but you never really know. Until you know.

I prefer the opposite.

I prefer realism in startups. It’s part of my stump P.32

In the end you don’t always get the answer you had hoped for.

BUSINESS STRATEGY

Tips for Avoiding Startup Legal Battles

By Young Entrepreneurs Council To find out how to make sure your crazy startup idea isn’t going to get you into hot water, we asked members of the Young Entrepreneur Council, an invitation-only organization comprised of the country’s most promising young entrepreneurs, the following: “What’s one valuable tip you’d give an entrepreneur with a disruptive technology/service to prepare for legal problems down the road?”

Here’s what YEC community members had to say: 1. Consult With an Attorney “Entrepreneurs should consider consulting with an intellectual property attorney while they are developing their products to avoid potential legal disputes. By doing so, they can possibly navigate around intellectual property battles instead of having to fight them.” ~ Doug Bend, Bend Law Group 2. Build an Army of Engaged Users

4. Don’t Over Plan Around Legal “Disrupting old industries is inevitably going to cause some type of legal or regulatory challenges. You can’t avoid it, and you can’t plan around it. But don’t let the future threats of legal issues prevent you from building your company at the start. If you build something awesome, then you’ll have a reason to fight, but start with the building something awesome first.” ~ Eric Koester, DCI 5. Invest in Legal Support “If you’re going to disrupt the status quo, it’s critical to know your rights, legal precedence and regulations that you may need to fight. Focus on the growth of your business, and hire a good legal team.” ~ Kelly Azevedo. She’s Got Systems 6. Invest in Liability Insurance “Although it may not keep you out of court in our litigious society, a general business liability insurance policy may mitigate your exposure when you end up there. Even though most people know that insurance can protect them from personal injury and property damage claims, it can also cover claims of false or misleading advertising for startups, including libel, slander and copyright infringement.” ~ Peter Minton, Minton Law Group

“If you’re small, the existing institutions will fight you on their turf with lawyers and lobbyists. The easiest way to disrupt entrenched interests, such as unions and trade associations, is to bring the battle out into the open. Acquire and engage a passionate user base, and it will take on the old industries for you.” ~ Neil Thanedar, LabDoor

7. Include Board Members

3. Put Together a Legal Team

8. Use Patent Lawyers to Protect Technology

“Get a high-quality legal team in place. Traditional industries are fighting back hard against new innovations, and if you don’t legally prepare in advance, you might struggle before you ever make it out of the starting blocks.” ~ Andrew Schrage, Money Crashers Personal Finance

“Disruptive technology from a small company attracts attention from larger companies with confidence in their legal budgets. Expect patent infringement and appeals to your patents as larger companies try to outlast your legal resources.” ~ Jay Wu, A Foreever Recovery

“If you know you are gearing up for a fight, I would look to include board members who are either lawyers or have been closely associated with other companies that have had similar legal situations.” ~ Sam Saxton, Salter Spiral Stair and Mylen Stairs

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HEAT 100 DIATRIBE He’s even been invited the White House and now works for NASA on the Robonaut team.

So what’s holding us back? Enter the ‘gloomies’. You know, they’re the one’s who’ve been talking about recession since 2009 while the stock market has been rising to the point where it’s now breaking records.

The ‘gloomies’ never see anything coming out of left field and changing the world.

Look back to 1979, when Communism was the way forward, the Cold War was at its peak, Shenzhen was a small fishing village and Scotland had a great fitba team!

The Tails of Progress

By Emerson From Loretta Lynn to Fatboy Slim, we’ve come a long way, baby. And in a pretty short space of time too, as technology has driven fundamental shifts in how we interact, what we make, and how we make it.

And the buy-in is global.

Think about it, the last time there was this much excitement about ‘a new tablet’, it had some commandments written on it!

Heck, we can even print prosthetics now. That’s right. And this is no Kodak moment, this is from the mind of 17-yearold high school student Easton LaChappelle in Colorado, who is using free online resources and the boom in inexpensive 3D printers to develop a functional prosthetic arm and hand.

It was no-hopesville all around. But by 1983 the US would begin a secular (long-term) bull market that would last 17 years, communism (Russian style) took a tumble in 1991’, Shenzhen is a now a core region for ‘made-in-China for the world…..and Scotland still has a fitba team.

So when you harken back to the ‘olden days’, back when we put a stamp on a message to arrive 4 or 5 days later, churned our own butter or used our phones for talking, remember that it’s progress that counts. Maybe 3D printing will change the world while the gloomies are fixated on Greek unemployment statistics.

Or maybe it’s like Sid Caesar said about progress: “The guy who invented the first wheel was an idiot. The guy who invented the other three, he was a genius!”

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