© Matthew Billington
For more than 30 years as a journalist at the Financial Times, I have been fascinated by business. Then, I decided to launch one. For almost as long, I have inwardly groaned when reading simplistic, seven-point cheat sheets to start-up success. So, I decided to write one.
Some FT readers, known for their sceptical hue, might consider the following lessons to be somewhat self-indulgent, hubristic and premature. They might not be mistaken. But, hey, as I’ve rapidly discovered, you go nowhere fast in business without hustling. And, following a year in which Google Trends tells us that more people searched for how to start a business than how to get a job, I hope these observations may be a little instructive. Nothing, I’ve discovered, beats learning by doing.
"One entrepreneur described the VC investment process as like undergoing a body-cavity search by someone with a faulty knowledge of anatomy"
The past three years, in which I have helped turn a draft business plan developed on an 11-week course in London at Stanford Graduate School of Business into a viable, FT-backed but standalone media company, called Sifted, have been the most exhilarating, unnerving, frustrating and rewarding I could imagine.
Trying to build a media start-up writing about European start-ups during Brexit, the worst economic contraction in 300 years and a full-scale war on the continent has thrown up some extra challenges. But we have also been lucky that our launch coincided with a surge of interest in European start-ups and a flood of venture capital pouring into the sector.
I am conscious that I have only been splashing around in the paddling pool of entrepreneurialism while others are aiming to swim the Atlantic. To use the industry jargon, I also count as an intrapreneur, rather than a true entrepreneur, because I have built this project while still at the FT. But for anyone wondering what it is like to launch a new business, here are seven lessons I have learnt along the way.
1 Ideas are great, but execution is all
Many budding entrepreneurs hide their ideas like Molière’s Miser hoarding gold. Their understandable fear is that someone else is going to steal their genius, life-changing ideas. But as my Stanford course director Yossi Feinberg made clear, ideas are worth nothing if they remain just ideas. And what distinguishes success from failure is rarely the quality of the idea itself but how well it is executed.
I remember interviewing Howard Schultz, the then chief executive of Starbucks (and current interim chief), who admitted that anyone could have had the idea of creating a global coffee chain. Frankly, any self-respecting Milanese barista has a better idea of how to make a decent coffee than most of those employed behind a Starbucks counter. But none of them has built a business worth $105bn. As the start-up acronym has it, nothing beats: JFDI. Just Fucking Do It.
2 Your new boss is the market
In his classic book Moral Mazes, the sociologist Robert Jackall set out to discover how big corporations work in practice, not just in theory. For his research, he interviewed dozens of managers about their jobs and came to one simple, and somewhat dispiriting, conclusion: “What is right in the corporation is what the guy above you wants from you.”
When you work in a big company, you need to please your boss. Whether or not you climb the corporate ladder often depends on how well your words and actions rhyme with your boss’s narrative rather than the results you achieve. But when you launch a start-up, you do not have someone above telling you what to do. The only judge of your performance is the reality of the market, which is arguably more honest but invariably more brutal. Are you producing something that enough people are prepared to pay for to keep you in business? If not, you’ll soon be fired by your disembodied new “boss”.
3 Find fellow travellers
No matter how good your idea, nor how brilliant you consider yourself to be, no one can build a business by themselves. You have to find people who share your vision, complement your skills and implement your plan. It also helps if you can find a co-founder who keeps things in perspective. As the saying goes, building a business is climbing a wall of worry. That is an anxiety best shared.
In that respect, my greatest contribution to Sifted’s (possible) success has been to persuade a good friend and serial entrepreneur, Caspar Woolley, to become the co-founder and chief executive. Given his experience and expertise, I trust him to do the right thing by the business more than I trust myself.
The first journalists we hired were also essential in shaping the culture at Sifted, which has made it such an enjoyable and productive place to work. The culture is enthusiastic, hard-working, critical, challenging. I still remember being somewhat taken aback by Amy Lewin, our first employee and now editor, bluntly telling me in an early meeting that one of my ideas was terrible. I had wanted to name the site Kludge, computer programmer jargon for a quick and dirty workaround. I still like the name myself but I was in a minority of one. That kind of radical candour is all too rare in a big company and all too essential in a start-up. It saves you from mistakes.
4 Treasure patient backers
Trying to persuade smart and busy people to invest in your idea is a humbling experience. We also discovered that it’s often hard to predict the outcome of investor meetings. Some potential investors roughed us up and then told us they were “in” by the end of the first meeting. Others said they loved the idea and never returned any further calls or emails. One entrepreneur memorably described the VC investment process as like undergoing a body-cavity search by someone with a faulty knowledge of anatomy.
One of the most useful lessons at Stanford was learning about the mindset of many investment firms. Anyone who has ever worked in a big company knows that a speculative plan is never good enough to launch a project. Any decent finance director would rip your cash-flow forecasts to shreds and laugh you out the door. They would add, for good measure, that they have plenty of other corporate initiatives that may be less ambitious but are a lot more certain to make a quick return.
"A speculative plan is never good enough to launch a project. Any decent finance director would laugh you out the door"
Why would a company not opt for the less risky option of consuming a little jam tomorrow rather than making an outside bet on creating a jam factory in five years' time?
But the investment calculus for most start-up investors is just the opposite. Venture capital investors are only interested in the jam factory, not jam tomorrow. They are obsessed with maximising the opportunity, not minimising the risk. In spite of all the fine-sounding patter about helping founders put a dent in the universe, their only concern is to shoot for a 100x return on their investment. It didn’t take Caspar and me long to realise that most mainstream VC firms were never going to invest in Sifted for that reason.
But we were lucky enough to find a pool of smart and interested angel investors, who were keen to see our idea flourish and were ready with advice but had no desire to micromanage the business. They also understood the importance of editorial independence. None has ever asked for any kind of editorial favour, and none would ever be given.
5 Learn from mistakes quickly — or die
Another liberating lesson is that you do not need to know all the answers when you start. Indeed, the core methodology of a start-up is experimenting, and failing, fast. I still remember Haim Mendelson, a Stanford professor who boasts a fine white beard and a merciless, forensic eye, ripping apart my team’s rickety business plan before concluding: “You’ve only got 70 per cent of the answers. But that’s probably good enough.”
If you only have 70 per cent of the answers when you start a business then you are evidently going to make a lot of mistakes. But that is part of the process: all start-ups are a trial-and-error game. Failure in lots of small ways is inevitable and, if you’re lucky, not fatal. The most important thing is to try to learn from your mistakes. While journalism tends to be a sequential activity — you must hit your deadline or you will have a very short career — running a start-up is all about parallel processing. Before you complete one job, another one is screaming for your attention. You are thrilled by hiring a wonderful marketing manager and then your lawyers spot a landmine in a term sheet. Your team runs a spectacular event and then a key tech developer quits. Your life becomes one never-ending succession of mini-crises that are rarely ever fully resolved.
One of the biggest mistakes we made was in hiring the wrong people for particular jobs. That was not so much a reflection on them: they were all smart and decent people doing their best. But they were not ideally suited to a largely unstructured and unpredictable working environment. We had no option but to lose them, which was a painful process for all involved.
6 ‘Happiness is positive cash flow’
The investor Fred Adler wrote a book with this title. The phrase has since appeared on countless investor decks, lapel badges and even cushions. But it is only when you start a business that you realise the terrifying truth that you really cannot remain financially unhappy for long. No amount of customer love or public acclaim for your product counts for more than hard cash. Unless you can generate sufficient revenue — or keep raising funds — then you are going to go bust. As they say in the retail business, turnover is vanity, profit is sanity, but cash is reality.
That realisation gnawed away at me during the early hours of many a night in April 2020, during the first upsurge of the Covid-19 pandemic in the UK, when Sifted began to run on financial vapours. Although the FT had agreed to back the business, it had always made clear that it was never going to backstop it come what may. The Covid-19 crisis had knocked our fundraising plans and forced us to confront the unwelcome reality that we might soon have to fire all 14 employees. Thankfully, our original seed investors, some enthusiastic new converts and the FT came through for us and we raised £1.3mn, giving us a new lease of life.
7 Water on granite
One of the most fun things about being an entrepreneur, even a nano-one like me, is swapping war stories with others who have played the game. I remember one piece of advice given to me by Kathryn Parsons, the irrepressible co-founder of Decoded, the digital training company. “I think the only indispensable thing you need as an entrepreneur is never to give up,” she said.
"There have been many nerve-shredding moments when I have wondered why on earth I had pursued such a crazy idea"
Compared with almost every other founder I have met, I have started with enormous advantages: the backing of a media brand as strong as the FT, a wide network of contacts and a relatively simple business proposition.
Even so, there have been many nerve-shredding moments when I have wondered why on earth I had pursued such a crazy idea. My respect for those founders who have stuck with it all to build a meaningful business without any of the advantages that I have enjoyed has increased exponentially.
We have attracted 15mn unique visitors since launch and if the first rule of any start-up is to stay alive, then thankfully we are still kicking. Financially, Sifted generated more than £2mn of revenue last year from sponsorship, advertising, reports and membership subscriptions and now employs 47 people. With £4mn in the bank via a fundraise from a specialist investment fund called ScaleUp Capital, we are in good shape to expand the business. Our plan is to more than double revenue this year. We sense a real hunger for the kinds of insights and data that Sifted can provide about this new generation of entrepreneurs.
In particular, I think back to a story I wrote nine years ago about Bill Strickland, a social entrepreneur who grew up in inner-city Pittsburgh and went on to found the Manchester Bidwell Corporation, a chain of remarkable arts schools. Starting with nothing but a strong conviction, Strickland wrung money out of the city’s wealthy elite to build a gleaming $7mn educational centre where deprived children could go after school to learn to paint, take photos, play an instrument or grow an orchid. By giving his students a sense of self-worth and self-discipline, Strickland has helped them excel at school and changed thousands of students’ lives.
Sifted founder John Thornhill © Tom Jamieson for The FT Weekend
At a concert in the school’s 350-seat jazz centre, I asked Strickland the secrets of his success. His answer was to stay humble, keep your eyes on the prize and never stop telling your story to anyone who will listen, over, and over, and over again until you wear them down. “It’s like water on granite, man,” he said. “Water on granite.”
I know now, far more than I ever did back then, the wisdom of Bill’s words. Creating a new business only ever happens one small drop at a time. The process can, at times, resemble Chinese water torture. But there are few activities in life more rewarding than providing an opportunity for inspirational employees to turn a burning idea into a reality. You need a patient family, indulgent friends, supportive investors and a high pain threshold. But look down one day and you may be lucky enough to see that you have etched something meaningful into stone.
John Thornhill is the FT’s innovation editor
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