What Is the Key to Startup Success?

Many people try to start their own business. It’s an attractive dream. You get to be your own boss, do what you love and you might even make a lot of money. The passion, enthusiasm and excitement are all there at the beginning. People work hard and pour hours into their own fledgling businesses. But in the end, most fail. According to a FastCompany article in 2012, 75% of startups fail. After 5 years, 50% have failed. Over 70% fail after 10 years. These are gloomy numbers, especially if you’re one of those people who dreams of beginning their own business. 

So what’s the trick? How can you make the top 25%? 

Fortunately, there is some advice to follow and, after many years of guiding and advising startup companies, Henner Diekmann of Diekmann Associates has learned many tricks of the trade. 

First, let’s take a look at what you should try to avoid if you’re starting up a new business. 

Management is a key element of any new business. There are plenty of mistakes to be made here. But the three most common mistakes are:

1.    Poor Focus – Perhaps there are too many projects or there are too many things going on at once. These prevent the business from focusing its energies on a main objective and achieving it, resulting in failure.

2.    Lack of Motivation – Yes, most people start a business precisely because they’re motivated. However, not everyone is ready for the great amount of commitment a business requires. So, what started out as great motivation can easily turn into low commitment and little passion.

3.    Being Too Proud – Some people are so proud of their business and their efforts that they fail to see a storm brewing. Whether it is financial or otherwise, failing to see or listen to others who try to warn of impending disaster can result in the business’s demise.

On a more general level, businesses fail because of major problems in the company. Obviously, management is also responsible for these problems, but it’s more difficult to pinpoint a precise error. A series of errors may produce these issues that result in company failure. What are the top 3 most common issues?

1.    No Market – No one will buy the product or service because there’s no need for it.

2.    Ran out of Money – When funding comes to a dead-end, so does the company.

3.    Wrong Team – People are the key players in any business. Without the right combination of skills, knowledge and chemistry on your team, the company won’t take flight.

Now, we’ll address the brighter side. Some companies do make it past these failures and soar on to success. What do these startups do differently? Successful companies also follow some patterns that you can learn from. Here are a few main points:

Commitment

Startups that succeed create a plan for their business and strive to make it happen. Rather than constantly changing the plan, they are committed to their goals and work passionately towards achieving them.

Flexibility

Commitment is important, but so is flexibility, to a degree. Startups and their founders need to be willing to make adjustments to the plan without drastically changing their end goals. Remember the issue of being too proud to see a problem? This is where flexibility comes in. Founders must be willing to see what’s happening in the company and adjust to meet new challenges and changing conditions.

Use Business Principles

Many people who startup their own company aren’t business experts. That doesn’t mean they can’t begin successful businesses though. Instead, it means that they must seek expertise and mentorship to make sure they’re covering their bases. For example, if you’re an engineer, artist or other expert outside the business arena, you may want to seek business advice when beginning your company to ensure that your financial ducks are all in a row and procedures are in place to protect the business. Bring on an accountant early in your business’s life to ensure you’re meeting the bottom line.

Plans

Finally, successful startups are strong in planning goals. Raise enough funding for each stage of the plan. You need to know approximately how long it will take for you to reach your goals and use intermediate milestones in between so you are constantly able to evaluate your progress.

Beginning a successful startup is no easy task, that’s certain, but it’s not impossible either. By studying and carefully creating a business plan, committing to it, but adjusting as you go along and seeking mentorship, you can work towards adding your business to the list of successful startup companies. 

Have you begun your own startup company? Are you thinking about it? Tell us about your biggest challenge or fear in the comments below.

Green Technologies Get Boost from EU’s Venture Capital Funds

There’s good news for green technologies these days. Last year, 2016, marked the largest increase in investments in green technologies by European venture capitalists in 9 years. Venture capital funds from Europe targeting clean energy are reported to have reached $834 million last year. Green technologies of interest include everything from anaerobic digesters to rooftop solar panels. But why has there been a shift in the focus of European venture capital funds towards this industry?

Specialists in venture capital and startups, such as Henner Diekmann of Diekmann Associates, judge that this shift in interest is tied to an opening of the green energy market due to the fact that private equity is seeking the next big boom. Research shows that 2010 was marked by a large funnelling of funds towards green technologies, pioneered mostly by private investors. However, since 2014, venture capitalist funds have started to grow steadily, funding the green technology market after the private equity interest dropped off. 

Now the investments venture capitalists are making are more targeted, seeking to support niche investments that come with smaller scales and bigger risks. Mainstream investment isn’t as attracted to these offers, leaving them open to VC. Basically, venture capitalist firms are filling an investment need that has great potential, but isn’t the right one for private or mainstream investors.

Let’s take a look at some examples of what some main venture capitalist firms are working on:

Terra Firma Capital Partners

This London based company is focusing on big green technologies including wind and solar power. However, the twist is that Terra Firma is looking to markets on continents other than Europe such as Africa, Asia and Latin America. According to a senior advisor, they are no longer looking to invest in Western Europe. The trend of looking abroad is one many others are following.

Oxford Capital Partners

This venture capital firm based in Oxford is focusing its investments on batteries, solar and anaerobic digestion. Specifically, the firm is interested in solar panels that will go on rooftops. One of the unique projects the firm is working on is an anaerobic digestion plant using farm waste to make electricity. 

Octopus Investments

In addition to investing in wind and solar, Octopus is also considering batteries. A part of their interest is linked to the enhanced frequency response tender that the National Grid in the UK is using. 

Zouk Capital

Taking a different approach, this venture capital firm based in London is focusing on investing in projects that address resource efficiency. In their eyes, solar and wind power are now more mainstream. These electricity makers now rely on gaining economies of scale. With resource efficiency, the firm hopes to invest in projects that recover materials that would otherwise be wasted, and use them to create energy.

As you can see, one of the key new areas that firms are interested in is batteries. What does this have to do with renewable or green energy? Solar and wind power are great, but they tend to be relatively unstable or unpredictable. You can’t be sure you’ll get the same amount of solar or wind energy each day; it’s just not constant. So, batteries are the solution for keeping grids steady even on a second to second basis. The National Grid in the UK says that flexibility is a principal concern and need as they move towards using more renewable energy. Batteries appear to be filling this need. 

The staples of wind and solar power also continue to attract investment. It’s only natural that this is the case as by 2040, it’s estimated that wind and solar energy will account for the majority of the UK’s power generating capacity, led by wind. This suggests that the industry is going to grow, a lot. According to the predictions, both solar and wind will at least double what they currently produce.

Anaerobic digesters are another technology that venture capitalists are interested in. Food waste turned into energy is a pretty exciting prospect. In addition to turning waste into energy, using anaerobic digesters is also more economically attractive than getting rid of food waste in landfills and incinerators. 

There are many other smaller technologies and projects that venture capital is supporting, giving green technology an overall boost within the UK and abroad. In this case, venture capital is working for the future of the planet, financing the energy revolution that we desperately need. This trend towards financing green technologies could very well change many aspects of our daily lives, helping eliminate harmful energy production strategies and moving towards a renewable future.

Are you interested in venture capital or green technology? Tell us how you see venture capital shaping the future of renewable energy in the comments below.

XFactor Venture Fund

An exciting new venture capital fund has made its appearance on the start-up scene. XFactor Ventures is the name of the new fund. What’s the unique aspect of XFactor? It’s run by women and aims to support start-ups with at least one female founder.

New start-ups often seek pre-seed and seed-stage funds in order to handle the costs associated with starting a business. Experts such as Henner Diekmann of Diekmann Associates, who help companies get set-up and put corporate structures and contracts in place, are familiar with the struggles companies face when seeking funding. The venture capital industry can be cut-throat, and funding is one of the biggest challenges that new companies face. In fact, 82% of businesses that fail do so as a result of cash flow issues. In addition, 27% of businesses report that they haven’t received the funding they need. 

Women can sometimes face more difficulties than men when it comes to successfully beginning a start-up, making XFactor Ventures a welcome change of pace. Unfortunate displays of sexism in the venture capital world can also result in skewed funding. XFactor Ventures may be able to eliminate some of these hurdles for women entrepreneurs.

Difficulties Women Founders Face

Women make up just 7% of the partner positions of the tech VC world. It’s easy to imagine that it’s harder for women to pitch to male VCs than women. This is highly likely, however there is research that shows that all VCs, men and women, show bias against women founders throughout the interview process. This results in devastating consequences. Women entrepreneurs are able to get only 2% of venture funding even though they own 38% of businesses in the US.

Researchers studied interactions between venture capitalists, both male and female, and entrepreneurs, also male and female, to discover why women consistently receive less funding than men. The results are shocking. Throughout interview processes, the researchers discovered that VCs asked men about potential for gains while they questioned women about potential losses. The bias was present across the board for both male and female VCs.

In numbers, 67% of questions asked of male entrepreneurs were focused on promotion oriented ideas such as hopes, ideals and achievements. On the contrary, 66% of questions asked of women focused on prevention which includes ideas such as safety, vigilance, responsibility, and security. 

The financial repercussions are staggering. Entrepreneurs who faced prevention-based questions only raised $2.3 million dollars throughout 2017 while those who answered promotion-based questions raised an average of $16.8 million.

Women entrepreneurs can buck the trend by answering prevention oriented questions with a promotion based answer. It doesn’t completely make up the difference, but it does help. 

XFactor Venture’s Premise

XFactor Venture is a unique venture capital fund because it’s run by women who have successfully founded their own companies. This follows a trend of many male VCs who start out as entrepreneurs and then move on to investment. 

The XFactor Venture team includes the following entrepreneurs: Jessica Mah (InDinero), Aubrie Pagano (Bow and Drape), Kathryn Minshew (The Muse), Liz Whitman (Manicube), Erica Brescia (Bitnami), Danielle Morrill (Mattermark) and Ooshma Garg (Gobble). The brains behind the team are Anna Palmer of Wondermile and Fashion Project and Chip Hazard of Flybridge. Chip is the lone male partner. 

The team of expert entrepreneurs will distribute $3 million in funding to 30 companies, with the requirement that each company has one female founder. It’s expected that each investment will be for $100,000. 

There’s more to the project than making a place for women in the world of start-ups and venture capital. The fund’s premise is actually based on concrete data about diversity in business. Women founders play vital roles in business success.

Why Women Founders Are Important

There’s evidence that having women play key roles in start-ups can make them more successful. Start-ups with one female founder perform 63% better in returns than all-male start-ups. That’s a significant difference worth investing in.

XFactor Ventures’ partners have all been through the drill of finding funding, meaning that they know exactly what it feels like to be on the other side of the table. This unique model is promising and makes a first step at evening out the access male and female entrepreneurs have to vital funding. Partners of XFactor stress that they will “generate phenomenal returns,” said Hazard. Pagano also made this point, saying that gender diverse teams outperform all-male teams, meaning that seeking mixed and female teams to invest is a promising venture.

Keep your eye on this exciting new venture firm. They’re sure to produce interesting results.

Government Makes New Plan to Support Start-Ups After Brexit

As the reality of Brexit sets in, the British finance ministry is making plans detailing how the country will continue to support new businesses now that funding from the European Investment Fund (EIF) may become unavailable. The treasury is working based on information from a study that shows British start-ups are missing out on £4 billion in funding when compared to what’s available to US firms. This funding gap exists even in the current set-up which includes EIF funding.

Experts that specialize in guidance and advice on company set-ups and corporate structures like Henner Diekmann of Diekmann Associates know just how crucial funding during the first years of business can be. Even promising businesses need funding to gain access to capital, staff and a marketing budget. In the UK, many start-ups aren’t able to gain access to this essential financial assistance so that they can move on to become important players in the country’s economy.

If the EIF funding were to disappear after Brexit, an even greater funding gap would exist. Last year alone, British companies were assisted by about £800 million of equity financing and £400 million of other additional assistance such as loan guarantees, all through the EIF. The fund also works with projects outside of the EU, but nothing is certain now that Britain will exit the bloc. 

The plan for creating a new funding solution is still in progress. As of now, the Treasury says it’s considering setting up a public-private partnership or putting the fund only on the government’s balance sheet with the possibility of selling it off at a later date. The fund could open up new possibilities for UK start-ups.

UK Start-up Needs

As mentioned above, there is a significant funding gap between UK and American firms. This funding gap can be seen clearly in the lack of fourth round investment funding available to UK start-ups. While in the USA nearly a quarter of start-ups receiving seed funding reach the fourth round of investment, only 1 in 10 British firms achieve this level of funding. Another interesting point is that although the UK leads the way in Europe in creating start-ups valuing $1 billion or more (also known as unicorns), the nation is far from leading the way on the world stage. The US creates a whopping 54% of the world’s unicorns, followed by China which creates 23%. One final interesting fact is that the top US firms are younger than the top British firms, suggesting that the US is better at growing new businesses into impressive, large-scale companies.

Based on these numbers, it seems obvious that the UK could stand to improve its numbers. If start-ups had better access to funding, it’s entirely possible that more UK businesses could be grown into big, stable companies capable of employing many more people.

Despite lagging behind the USA and China, Britain is still home to innovation and leads the way in Europe in terms of new successful start-ups. The goal is to take this innovation to new heights by eliminating the problems related to too little funding. The UK start-up sector will likely benefit from this initiative, even if it began due to concerns over the consequences of Brexit. 

Brexit: An Overview

This initiative to boost funding for start-ups appeared as a response to concerns about the economic consequences of Brexit. The process of Brexit has been looming in UK politics and among citizens for a few years. In June 2016, the entire UK had the opportunity to vote in a referendum to approve or reject leaving the European Union. The referendum to leave was approved in a narrow vote.

Currently, the UK is undergoing talks with the European Union council to discuss the terms of Brexit including fees that the UK will pay to the EU. The talks will take two years or more. The current scheduled leave date is 29^th March 2019. 

Brexit will have many consequences and will affect both Great Britain and the rest of the EU countries. However, to date, there haven’t been signs of immediate severe trouble for the British economy. In fact, the UK showed 1.8% growth in 2016, which is good when compared to other strong economies. Unemployment has also continued to fall, although growth has slowed in 2017.  Overall, things look pretty good considering that some predicted doom and gloom should Brexit be passed.

Turning to Start-ups After Brexit

A funding for start-ups initiative along with a growth in entrepreneurial spirit was noticed shortly after the Brexit vote was made. In London, over 600 start-ups were launched daily during the first 6 months of 2016, suggesting that Brexit will not deter the creation of businesses, but rather spur them on. This trend will only improve if more funding becomes available to help start-ups make the step to full-fledged, stable businesses.