Serious Simplicity

Yesterday Phase Magazine published a short interview feature about entrepreneurship and start-ups with yours truly. Am posting the answers to the original questions here together with scans of the actual published article below. Thanks to Caroline Gatt for taking the time :-)

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1.    What is ethical entrepreneurship and why do you think it is important?

‘Ethical Entrepreneurship’ is the idea that business ventures – and their success – need not only be measured in financial terms.

By this I do not mean that entrepreneurs and businesses should switch professions and become philanthropists or missionaries. Nor does it mean that business owners should not be ready to take tough decisions like firing people when necessary. All businesses need to profitable and that should always be a core aim. But it needn’t be the only one.

Ethical Entrepreneurship happens when entrepreneurs are not just out to make money, but also to make meaning.

2.    What does it mean to be an entrepreneur?

I don’t believe there is a one-size-fits-all definition of an entrepreneur. Bill Gates, Caqnu and the pizza guy down the road are all entrepreneurs. But I’d be hard pressed to say what is realistically common between them.

Of course this is an extreme example but it doesn’t diminish the fact that entrepreneurship tends to be indifferent to background, personality, sex, creed, race, physique or any other typical ‘market segmentation’ criteria. Some entrepreneurs are shy (Ben & Jerry’s), some are geeks (Bill Gates, Microsoft), some are show-offs (Richard Branson, Virgin), and others environmentalists (Anita Roddick, Body Shop). Some were born rich (Jeff Bezos, Amazon) and some poor and oppressed (Martin Varsavsky, Fon).

I think your personality and background define what kind of entrepreneur you can be – not whether you will be one. And being an entrepreneur means getting up off your ass and doing something.

3.    What was the first company you set up and when did you set up, how old were you?

In 1998, when I was 18, I set up a web and graphic design company with my cousin. We produced a website and a brochure for one client!

4.    Since then what companies have you set up and what various things are you currently working on?

Since then I have co-founded an advertising agency and a mobile marketing company. Today I split my time between independent tech consulting and working on a new company focused on helping people reduce electricity consumption.

5.    What motivated you to set up on your own and how did you know what to do?

Growing up I was a rather shy and introverted person. However I inadvertently discovered – through my work with a political student organisation – that when I needed to convince people of something (I believe in) I could easily overcome my introversion. And life became much more fun when I could socialise and network. Entrepreneurship is a great ‘excuse’ to meet people and thus it makes life fun for me. Of course, other factors like peer influence, financial independence and the desire to create something that has a positive impact on society all play a part too.

As to ‘knowing what to do’, there are various ways of finding out. Most people tend to be very helpful when you ask for advice. Reading and research helps too. It’s also important to document what you do so that you can remember in detail what you did when something worked or not.

6.    What other entrepreneurship projects/initiatives did you work on? What are they?

Startup Malta is a non-profit foundation aimed at promoting entrepreneurship in Malta. It was founded in 2000 and it launched Malta’s first ever business plan competition. I joined in 2001 and was active until 2006. Unfortunately, since I left in 2006, the foundation has not been active.

More recently I have been involved in Smarter Start – a small entrepreneurial think tank. I can’t say too much about what we’re doing because we’re mostly researching at this stage but we’re hoping to launch a few interesting tools to help people get started on the entrepreneurial path.

7.    Why do you think these initiatives are important?

During 6 years of Startup Malta activities, hundreds of people attended and participated in our competitions, training events, workshops, networking meetings and seminars. To me this is a clear indication that there is a significant group of people who want to learn and practice entrepreneurship – and that’s one thing that makes it important.

On a more practical level, during a global credit crunch and recession such as this one, where your likelihood of being unemployed quadruples overnight, a few entrepreneurial skills could certainly have been useful in transforming the jobless into job providers.

8.    What did you study, and how did your studies help / hinder / not related to your entrepreneurship?

I studied computer science and then read for a master’s degree in creativity and innovation. I think that any sort of study is helpful and there isn’t one kind of field or course that makes it more likely for you to be a successful entrepreneur. In fact, a long-running joke amongst venture capitalists is that MBA and commerce students make the worst entrepreneurs! I don’t think they mean that if you have an MBA you can’t be a good entrepreneur. The real lesson is that you shouldn’t be overconfident of the knowledge that you have and need to be constantly aware that there’s always much more that you don’t know.

9.    What was the toughest lesson you have learnt from your actual experience of setting up alone or in partnerships?

Working with partners is always much more fun as well as the added benefit of mutual encouragement. However, having a partner just for the sake of not being alone is not a good idea. While there is probably no such thing as ‘perfect business partners’, there is definitely an abundance of ‘terribly bad business partners’. This could result from a number of factors but typically stems from a misalignment of expectations. If you think that firing somebody is tough, ‘firing’ or breaking up with a business partner is much harder. Just make sure that if you’re going into business with somebody, he or she knows clearly why you are doing it and that the other person has a complimentary skill set to yours.

10.    Did any of your businesses fail? What is failure for an entrepreneur?

The ‘correct’ answer is that failure is a learning experience. In reality it is a depressing, emotional and trying time.

However failure will at some point in time happen to everyone – entrepreneur or not. Just ask somebody who’s been fired, passed up for promotion or lost an important football match. I think an important aspect of dealing with failure is being pre-emptive. That is, being aware of the potential for, and consequences of, failure before you put yourself into an irreversible situation. The worst failures are those that blindside you.

Many of my projects and ideas have failed. But the only times that they truly affected me badly were the times where the failure completely and utterly surprised me because I had been too blind or caught up in the rosy aspects of a project to recognise and deal with certain risks. I would recommend any budding entrepreneur to research and read up about Scenario Planning to help minimise such experiences.

11.    What has been your biggest success so far? What keeps your motivation to be an entrepreneur going?

Probably presenting my latest project at the LeWeb conference in Paris last December was my biggest success in terms of visibility. However each and every successful client interaction I’ve had, be it getting sponsorship money, selling a product or getting people to attend an event, has always yielded the same feeling of deep satisfaction. In part, my motivation to keep going is definitely due to wanting to experience this feeling one more time, every time.

12.    Will everyone’s experience of being an entrepreneur be the same?

Some things will be the same. It is almost a given that you will have some very low and tough times. You will have people who will react negatively to your project and people who try to dissuade you from doing your own thing. You are also likely to have dissatisfied customers and possibly even angry ones.

If you persevere you are very likely to also have significant ‘highs’: grateful customers, positive feedback, financial reward, the possibility of ‘leaving a legacy’, or whatever makes you tick.

What will be different for everybody is the process of achieving those highs and of dealing with the lows. This will depend quite a bit on your personality and habits so it’s crucially important to at least be honest with yourself and acknowledge your strengths and faults in order to make the best of the bad times and to remain an Ethical Entrepreneur during the good ones.

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The full page scans of the article:

Last weekend I watched Porn: The Musical in Valletta with a few friends. It was a wonderful humorous performance and I can’t wait for it to be staged again to be able to drag more people along.

Being an entrepreneurship nerd, a few business-related thoughts crossed my mind while watching the performance which I will now force-feed you in this post.

The play’s script was written by Malcolm Galea who also directed and starred in the performance. The parallel with the role of a start-up entrepreneur is striking, and surely not the first time made. Yet I believe that entrepreneurs can potentially learn a lot from the process of writing and producing a play.

Act I: Prologue

Imagine yourself, for a minute, having to perform a play that you yourself wrote in front of an audience of several hundred people sitting just a few feet away from you. Think about the level of confidence you would need to have in your product and the value it’s providing your target audience. Now compare this to the last time you found yourself in a position where you had to sell – in whatever way – your company or project to an investor, customer or end-user.

So many entrepreneurs I meet and read about claim to have a fear of selling: the “but-I’m-not-a-salesperson” syndrome. It’s nothing more than a lack of confidence in the product. I have never met anyone, however shy or introverted, who would not wax lyrical about something they truly believe in and are passionate about, be it an environmentalist group, a new diet, a favourite brand; but rarely their job. That is a problem that as an entrepreneur you can’t afford to have.

A performer goes on stage certain in the knowledge that this is what she or he wants to be doing, right here right now, and furthermore that what he’s about to do and say is what the audience wants to see and hear.

Act II – The Twist

Actors, playwrights and directors are not only literally putting everything on the line based on their belief in their product. They typically only have one shot at it.

Performances have a hard and fast deadline. You can’t fudge the dates with a musical. You sell tickets for the opening night on the 23rd of March 2009 and that’s when people will show up. You can’t put up a “coming soon” notice: the deadline is immutable.  And if what was promised isn’t delivered, the reviews, critics and word-of-mouth will be harsh, brutal and irreversible. By that fateful date all the props, backdrops, casting, lighting, costumes, printing, backstage, programmes, staff, acts, rehearsals, make-up, choreography, music, sound effects and refreshments need to be sorted and done. You can’t call your client at midnight and say you’re going to be delayed because you need to fine-tune the lighting sequence of Act 3.

You gotta go with what you’ve got and it turns out to be good not because of a lucky charm that claims it will be alright on the night. It turns out to be good because there’s a built in reserve of value in the entire production that allows for a margin of error. Does your cool new web application deliver such unprecedented value to your users that they are quite willing to put up a Javascript error every now and then because, when it works, it’s so damn wonderful?

Act III – Epilogue

And finally, how does all this get done? If you’ve ever been backstage or involved in a theatrical production you’ll know that there’s a whole host of people involved. They’re getting paid, true, but that doesn’t force the make-up artist to get all his friends to buy tickets, to badger his social networks with invites to Facebook groups and to coerce his journalist sister to publish a press release in the local paper.

It all gets done because the producer follows an excellent recruitment strategy. He doesn’t recruit the cheapest or the fastest. He recruits (casts) the best and the dedicated. Just as importantly, the employees (actors) allow themselves to be recruited because they’ve read the script and loved it. They see themselves in a particular role and can’t wait for their friends and journalists to see them perform that character. The director in turn allows them to shape the character in their own idiosyncratic way.

What you should be looking for is a team that will enthusiastically go home after a day’s work and tell the world to come and enjoy the show!

And that’s how it gets to be all right on the night.

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Following Monday’s London event I’ve been refining my thoughts about the whole VRM concept. It interests me because it is very closely related to a subject I have a strong interest in: Ethical Entrepreneurship.

Entrepreneurship is one of those topics that polarizes people: some evangelize and others vilify it. Whichever side of the fence you’re on, it is incontrovertible that entrepreneurship is one of those phenomena that have a significant impact on our kind of society. Many entrepreneurs create new ideas, disseminate information, create jobs, tend to be politically influential and often donate substantial sums to educational and charitable institutions. At the same time, many entrepreneurs also tend to be greedy, ruthless and inconsiderate to environmental or social considerations in pursuit of their financial objectives.

VRM, is but another model for entrepreneurship (like Social Entrepreneurship, Permission Marketing and Ricardo Semler’s approach) that is trying to change what I call the “Traditional” Entrepreneurship Model. I put together a small diagram to show what I mean by this:

In the Traditional Entrepreneurship Model there is an exchange of value between customer and entrepreneur. The relationship hinges on the exchange for both parties but the outcome is often wildly different. The customer parts with money in exchange for a perceived set of values that far exceeds the price paid. For instance, in return for the price of an iPod, the customer gets aesthetic beauty, a feeling of importance, a relief from boredom when traveling, a portable hard drive, ownership of a physical object and a sense of belonging to a particular commuinity (friends, Apple fans, etc…). On the other hand, the entrepreneur typically gets only a financial return.

I believe it is this imbalance that drives entrepreneurs to unethical business practices. Practices that range from spamming and deceitful marketing right up to employee/third-world exploitation, misuse of natural resources and environmental disregard. (In short, all the stuff that Naomi Klein has been warning us about.)

VRM and similar entrepreneurship models are, in different ways, attempting to address this imbalance. An “Ethical” Entrepreneurship Model would look something like this:

The core difference is that both entrepreneur and customer obtain more than just a financial return from the value exchange. This is not to say that business ventures should not be profitable. Rather, that profitability should not be measure in purely financial terms.

How to go about doing it, and how some people are already doing it successfully is a topic for another day however…

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If you’ve ever read Carlota Perez’s work, and/or are endowed with an average amount of common sense, you will know that like many other things, economic life cycles follow certain patterns. So do technological innovations. Some people call them ‘revolutions’. Like the Industrial Revolution or the Internet Revolution.

Very often, the climate (economy, markets, investors, …) must ’storm’ before it can ‘form’. And many times this storm takes the form of a financial ‘bubble’.

Financial bubbles are periods during which companies are over-valued. Essentially a form of inflation but instead of currency-based it is business-based. Investors and entrepreneurs (and, sadly, the general public) are misled into believing that a company is worth many more degrees of magnitude than it actually is. Very often, it’s worth would actually be negative, meaning that it loses money. That’s why it’s called a ‘bubble’ – because the investments look large and shiny from the outside but in effect are as empty as hell on the inside (no clients, no sales, no products).

This is what happened at the turn of the millennium in the infamous Dotcom Bust. Hundreds of companies were perceived to be worth millions for the wrong reasons. The ‘wrong’ reason was mainly that entrepreneurs and investors got all excited about the possibility of selling stuff using the Internet instead of the regular brick-and-mortar store. In all this enthusiasm, they forgot to take a good look at how the companies were supposed to make money… what used to be quaintly called a ‘business model’.

By burning up an approximate $4 trillion, investors and entrepreneurs found out the hard way that there is only one real way to value a company, and that is by how much it sells. They re-learned to think in terms of “Income minus expenditure”. Units sold minus cost per unit. They learned that whatever business you’re in and however much cool technology you have, you need a decent business model.

Or did they?

Just six years later, there is a disturbing resurgence of the same feeling disguised as something different. Under the guise of the ubiquitous – and almost meaningless – “Web 2.0″ label, companies are getting funding, or being acquired, simply based on the fact that they have a ‘community’. The approach of “get traffic and then try to monetize” is starkly reminiscent of the “put it on the Internet and you’ll make money” tagline that was the 1999 motto.

And it’s not working out too well.

Youtube and Postini are not making money and Digg is finding it impossible to sell itself. Twitter is raising money but they’re not sure how to go about making it. (How do you make money for sending free text messages to people? Anytime now, Twitter will begin ramming adverts down peoples phones. A guaranteed audience loser.) Facebook stumbled upon a community and is now desperately trying to justify all it’s VC funding by foisting ads on its users. The chaps at Facebook apparently have such a hazy idea of how to make money that they’re becoming “VCs” themselves, expecting Facebook developers to come up with ways of making money for them. These are just the big names of course, although there are countless other start-ups who received funding and went bust.

Sometimes, history can repeat itself much faster than we expect. If you’re a budding entrepreneur, have a good hard think and make sure you have a clear idea of how you expect to make money. And if you find a VC who thinks it’s a good idea to give you money just because you have traffic and ‘an audience’, run as fast as you can. You may think its cool to get the millions, but when the Bubble version 2.0 bursts, you’ll be left standing in the middle of a very empty space.

Techrunch today published excerpts from Ray Ozzie’s strategy memo to employees. Although most of it was somewhat of a “duh-welcome-to-the-club” moment one bit struck a chord.

The Power of “Choice” as business moves to embrace the cloud

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design patterns at both the front- and back-end are transitioning toward being compositions and in some cases loose federations of cooperating systems … [because] … myriad options exist for delivering applications to the user: The web browser, unique in its ubiquity; the PC, unique in how it brings together interactivity/experience, mobility and storage; the phone, unique in its extreme mobility.

It struck a chord because of a coincidentally related breakfast discussion this morning. The Web has brought a previously unparalled power of choice and democratisation to consumers. Global peer-to-peer discussions fulled by user generated content have not only redefined the knowledge base on which consumers make decisions but also “coerced” large corporations’ PR machines to change their traditional modus operandi. It’s becoming harder than ever for companies to hide misdemeanors – from the littlest to the harshest – because the web is both ubiquitous and persistent.

Despite corporations being larger than life, CEOs have found themselves in a situation where  they must engage in direct conversation with their customers, be it via blogs, Twitter or any other social medium. A recent classic example is the lash-back Facebook suffered on its launch of Beacon.

A New Breed of Entrepreneurs

More interesting and to the point however is what a new ‘breed’ of entrepreneurs are doing given this climate of potential insurrection and swift customer disengagement. Companies like 37Signals, Fon and Seesmic are not only participating in the discussion, but initiating and embracing it. Seesmic in particular, being still in alpha (or is it beta now?), is not just listening to users’ feedback, but basing its product design decisions on what users ask for a priori.

Hopefully, as consumers become more and more used to this method of doing business, they will not only love it more, but come to expect it. And from simply reshaping their PR departments, companies the likes of Microsoft, Apple and the horrendously complicated mobile operators, will be pushed toward redesigning the way their product design departments work.

Thanks to Jim at EzPzApps for inviting me to answer a couple of questions about technology and creativity. You can get the full article here.

I met Jim at an entrepreneurship event some years ago in Malta and I’ve followed some of his very interesting software projects. His most recent “ClipaSearch Pro” is definitely worth checking out!

Early-stage entrepreneurship encompasses a spectrum of stages in the entrepreneurial life: ranging from the “idea-in-the-shower-phase” to business planning through to prototyping and launch.

This period of time is crucial in the life of an entrepreneur. Not only do decisions taken at this time impact upon the eventual success potential of the start-up, but more importantly they play a significant role in helping the entrepreneur decide whether or not she actually wants to be an entrepreneur. Early-stage entrepreneurship is therefore important because this period will determine whether:

1. the idea the entrepreneur has convinces her to launch the venture, and
2. impacts directly on probability of success of the venture if the answer to (1) was “yes”

Therefore developing skills at dealing with the issues arising in early-stage entrepreneurship will lead to:

1. more entrepreneurs
2. higher success rates

This blog is intended to be a coming-together-place of snippets, thoughts and ideas about entrepreneurship, creativity, and simplicity.

The main driving topic will be early-stage entrepreneurship, or in more conventional words, “start-ups”. The terminology is important however because I take ‘early-stage entrepreneurship’ to mean something slightly different from ’start-up’. Or rather, slightly more focused.

Typically, a start-up is a business venture that is in the process of commencing operations based on a specific business idea/model. In other words, the entrepreneur and her team have come up with a business idea and are executing. ‘Early-stage’ however refers to the subset of start-ups within which there has not yet been made a significant commitment of resources to a specific idea/model. Both the idea and the organisation are still fairly ‘embryonic’ at this point and can still be changed, moulded and refined much more easily that would be the case at a later stage.

Secondly, I use early-stage entrepreneurship and not early-stage start-ups to emphasise the innovation element. Every new venture is a start-up yet arguably not every one is necessarily entrepreneurial. I like to differentiate between ‘entrepreneur’ and ‘businessperson’, lightly defining the distinction as being that the former is being somewhat innovative while the latter is simply trading using tried-and-tested ways.

So early-stage entrepreneurship is all about the subset of new ventures that are in an innovative idea development phase.